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EU passenger car registrations increase 7.1% y/y during January – ACEA

15 February 2018 Ian Fletcher

Passenger car registrations in the European Union have started 2018 in buoyant fashion with a gain of 7.1% year on year (y/y).

IHS Markit perspective

  • Implications: The EU market last month was boosted by positive working-day factors, localised factors, and a largely positive economic outlook for now.
  • Outlook: IHS Markit anticipates passenger car growth in the EU during this year will be around 1.1% y/y to 15.34 million units, before sliding back again during 2019.

The passenger car market in the European Union has made a positive start to 2018 with registrations having grown by 7.1% year on year (y/y) in January. According to the latest data published by the European Automobile Manufacturers' Association (Association des Constructeurs Européens d'Automobiles: ACEA), registrations during the month increased from 1,170,256 units to 1,253,877 units.

However, the month was far weaker for the European Free Trade Association (EFTA) market, with registrations in this region – made up of Iceland, Norway, and Switzerland – declining by 3.7% y/y to 32,501 units in January.

Registrations in the EU last month were supported by gains in four of the big five markets in the region. The German market remained the largest in terms of volume at 269,429 units, which amounted to an impressive 11.6% y/y gain. Another significant gainer last month was Spain, where the market increased by 20.3% y/y to 101,661 units. Furthermore, France and Italy were up by 2.5% y/y to 156,846 units and 3.4% y/y to 177,822 units, respectively. The exception to this improvement was the United Kingdom, where the market declined for the 10th month in succession in January, this time falling by 6.3% y/y to 163,615 units.

Outside these key markets, the growth trend was generally positive, even for those markets that had already reached high levels, such as Austria, Belgium, Denmark, and Poland. Other markets remained in a recovery phase, such as Greece and some in Central Europe. Nevertheless, there were also some markets that retreated, which in some cases were likely to be one-offs (Portugal) and in others part of an ongoing trend (Ireland).

The growth in the EU last month meant that many larger OEMs received benefits. Among those were a market-outpacing 9.2% y/y gain recorded by the Volkswagen (VW) Group to 308,353 units. Its namesake brand made a contribution to this improvement of 4.4% y/y to 143,028 units, as crossover offerings such as the Tiguan and the new T-Roc made an impression with customers. Crossovers also helped boost Skoda (up 21.6% y/y to 61,337 units) and SEAT (up 20.0% y/y to 33,440 units) with the Skoda Karoq and Kodiaq and the SEAT Arona and Ateca. However, these also underpinned growth from its other models as well. Porsche also put in a surging performance with a jump in registrations of 30.6% y/y to 6,375 units. By contrast, Audi's month was more modest, growing by just 3.1% y/y to 63,794 units, as it awaits the replacement of two volume performers, the A1 and A6.

Groupe PSA established a comfortable lead over Renault Group in January, as it cemented its position as the biggest-selling French-based automaker in the region. Its registrations during the month increased by 73.4% y/y to 207,984 units; however, this was by virtue of the additional volumes that it now sees from the acquisition of Opel/Vauxhall, which accounted for 73,246 units of its sales. However, even without this, PSA would have seen growth during the month of 12.3% y/y thanks to other key PSA brands: sales at Peugeot – which is still benefiting from the introduction of the 3008 and 5008 crossovers – rose by 15.1% y/y to 82,170 units, while Citroën sales grew by 10.7% y/y to 49,704 units, helped by the new C3 Aircross. Nevertheless, the DS Automobiles brand – which is yet to see new-generation vehicles come on stream – remained the weak link, its registrations falling during the month by 22.9% y/y to 2,864 units.

Renault Group put in a solid performance during January, its sales increasing 9.5% y/y to 116,559 units as Renault-brand volumes increased by 6.0% y/y to 77,267 units and Dacia registrations grew 17.2% y/y to 38,906 units, with the second-generation Duster just starting to reach the market.

Other notable gainers last month included Toyota Group (up 9.6% y/y to 66,156 units) and Hyundai (up 14.4% y/y to 44,108 units), while other mainstream OEMs recorded improvements behind the market as a whole, or in the case of Nissan, marginal dips. Premium OEMs had a mixed month, and while many recorded gains, these were behind the market as a whole. Jaguar Land Rover (JLR) also suffered a decline.

Outlook and implications

The EU passenger car market has started the year in buoyant fashion. However, as IHS Markit's head of Western Europe forecasting, Martin Benecke, observes, there was a positive calendar effect that helped the bottom line sales numbers in many markets in January. Furthermore, some markets are seeing an improvement on local factors, which are their helping performance. These include Finland, which has seen the introduction of a new scrapping incentive and a new round of tax changes, and Germany, which is thought to have been helped along by OEM scrapping deals related to the removal of older diesel models from the country's roads. However, local factors have also caused the weaknesses seen in a few markets such as Ireland, which, despite the recent positivity in the economy, is struggling in the wake of high numbers of used-car imports from the UK due to an earlier fall of the British pound-to-euro exchange rate following the Brexit vote. Meanwhile, in Sweden, the sheer strength of the market in the past couple of years has caused the dip downwards last month. Furthermore, in Portugal there has been the unusual occurrence of problems relating to the system that issues vehicle registrations. However, this is expected to result in a boost to February's sales in this market.

Benecke expects that growth will prevail over the course of 2018 as pent-up demand continues to be released (largely in the southern European markets) and additional volumes added to fleets – not just businesses, but also rental and dealer volumes. This is anticipated to ensure a healthy flow of renewals before the amplification of any impact from Brexit.

Positive economic factors are also in play. IHS Markit raised our Eurozone GDP growth projection for 2018 in the January forecasting round from 2.2% to 2.3%. The main trigger for the recent upward revisions is a more robust outlook for Germany after stronger-than-expected GDP developments in the third quarter of 2017. Meanwhile, survey evidence from the final months of 2017 and early 2018 suggests the Eurozone economy will continue to perform well in the first half of 2018. There are also markedly improved labour markets, a competitive euro in tandem with decent global demand, very accommodative monetary policy, and currently elevated business and consumer confidence, which support Eurozone growth. Fiscal policy looks to be currently broadly neutral. Nevertheless, there remains the possibility that growth could be hampered by consumers being more reluctant to spend as their purchasing power is squeezed by overall higher inflation and limited wage growth in most countries.

One of the main stand-out factors not noted in ACEA's data directly is the fuel split. Diesel registrations continue to fall in many markets, not least the German and UK markets where this situation has been particularly dramatic. While demand for alternative-fuel vehicles is growing, a large proportion of customers seem to be shifting from diesel to more conventional gasoline (petrol) instead.

IHS Markit anticipates passenger car growth in the EU during this year will be around 1.1% y/y to 15.34 million units, before sliding back again during 2019.

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