The German passenger car market continued on a good upward tick in November, helped by a positive calendar effect.
IHS Markit perspective
- Implications: The German passenger car market posted a very robust uplift of 9.4% y/y in November to 302,636 units, according to the latest set of data from the German Federal Motor Transport agency.
- Outlook: The strong November performance helped the market post a 3.0% y/y increase in the first 11 months as strong economic fundamentals continued to propel the market although the longer term outlook is less certain as a result of the growing potential for macroeconomic turbulence.
The German passenger car market posted a strong rise of 9.4% y/y in November, which was helped by one extra working day, to record a sales figure of 302,636 units, according to the latest data released by the German federal motor transport authority (the KBA). This was a positive result and indicated healthy growth even with the calendar effect taken into account. This helped the year-to-date (YTD) improvement climb by 3.0% y/y to 3.2 million units. There was a particularly positive increase in the private market of 15.9% y/y to take a 36.6% share of the market. The share of combined business registrations (including dealer and fleet) rose by 6.0%, which equated to a 63.3% share of the overall market.
In terms of the brand by brand performance, the country's perennial market leader VW actually enjoyed a very strong month with a performance that exceeded that of the overall market, with an increase of 8.2% y/y to 58,209 units. This was helped by increased orders, with the new Polo and T-Roc generating more footfall into dealerships, while other core models performed well. This led to an improvement during the company's performance in the first 11 months of the year, although it still recorded a 4.2% y/y decline during the period to 587,683 units. Mercedes-Benz held second spot as is also customary, although it actually failed to match the strong overall uplift during the month, managing only a 0.6% y/y increase to 28,687 units. The ageing nature of core ranges like the A-Class, which is due for replacement next year, is a factor in the decline while the C-Class is also scheduled to get a major facelift next year. Mercedes-Benz posted a 6.3% y/y increase in the first 11 months of the year to 307,384 units. Audi took third spot and managed a very positive lift of 12.0% y/y during the month to 22,949 units, helped by ongoing demand for the Q2, while it is also benefiting from a number of key models which have been replaced in the past 18 months, including the Q5, Q7 and A5 models, while Audi also launched the new A8 at the recent Frankfurt Motor Show. Ford performed well to post an uplift of 17.4% y/y to 21,972 units, with the new Fiesta proving popular with private buyers, with this helping Ford take fourth place in the sales charts ahead of BMW. Ford's sales in the first 11 months of the year rose 2.5% y/y to 226,257 units. BMW was the worst performing of all the major brands operating in Germany in November with a 1.6% y/y increase to 21,960 units. Other notable performances were recorded by Skoda in seventh overall during November with a 11.9% y/y increase to 17,687 units, with the company recently launching the Yeti replacement, the Karoq, which will be a very strong seller in the German market. Other strong import brands in terms of growth were Tesla (+ 98.5%), Peugeot (+ 72.4%) and Dacia (+ 53.4%)
Outlook and implications
The German passenger car market continues to post steady growth on the YTD trend, which reflects the still very robust and healthy nature of the macroeconomic environment. However, there will be some concern about Chancellor Angela Merkel's inability to form a coalition government and how this may affect political and economic stability going forward, especially at a time when Germany's influence is needed on the negotiations which will determine the deal, or otherwise, of the terms of the United Kingdom leaving the European Union (EU). The main stand-out trend of the German passenger car market in November was once more the growing split in the performance of gasoline (petrol) and diesel passenger cars, with sales of gasoline-engined cars rising by 28.0% y/y in November to take a 61.7% share in the overall market. At the same time diesel continued on its marked downward trend with a 17.0% y/y decline in volume with a market share of 34%. This trend was backed up by the KBA announcing that average sales parc CO2 went up by 1.1% y/y to 127.8g/km, which is the direct result of rising gasoline car sales in the face of the raft of negative publicity surrounding diesel in the wake of the VW diesel affair. With manufacturers being forced to meet even more stringent EU emissions regulations which are focused on a fleet average emissions figure of 95g/km by 2021 diesel share is likely to stabilise moving into 2018, but it is also no coincidence that the German OEMs are accelerating their electrification plans at the same time. However, despite some challenging conditions for the OEMs and wider challenges across the European political and macro spectrum the fundamentals of the German economy appear as if they will remain robust in the short and medium term. GDP growth pace doubled to 0.8% q/q during January–September 2017, which will see annual growth of around 2.5% during 2017–18. With key leading indicators – manufacturing purchasing managers' index and the Ifo Business Climate Index – recently marking six-year and post-1990 peaks, respectively, working-day adjusted annual growth is expected to increase from 1.9% in 2016 to 2.6% in 2017 and 2018. Inflation is set to accelerate from 0.5% to 1.7% in 2017 and 2.0% in 2018. However, European Central Bank monetary policy will remain too loose for Germany. Given budget surpluses, income-tax cuts and additional public spending on transport and IT infrastructure are expected in 2018–19. All this should see the German passenger car market record a full year passenger car sales figure will rise at slightly over 3.0% y/y in 2017 to 3.47 million units, with a similar figure forecast for 2018.
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