German passenger car sales rise by a strong 7.4% in February
The German passenger car market is still performing robustly before the scrappage momentum runs out.
- Implications: The German passenger car market posted a very robust 7.4% y/y growth figure in February to 261,749 units.
- Outlook: This meant that the uplift for the first two months of the year was an extremely robust increase of 9.5% y/y to 531,178 units, with growth backed by ongoing economic strength.
IHS Markit perspective
The German passenger car market posted a robust increase of 7.4% year on year (y/y) during February to 261,749 units, according to the latest data release by the German Federal Motor Transport authority (KBA). Business and fleet registrations took a 63.1% share of the overall market, which was a 0.8% y/y increase. However, the big growth story was for private car sales which occupied a 36.9% share of the market, although overall volume rose by 21.3% y/y as private cars ordered under the various OEM diesel scrappage schemes continued to be registered.
Leading brand Volkswagen (VW) posted another very robust increase with its sales rising by 12.4% y/y to 47,822 units, with sales for the first two months of the year up by a combined basis of 10.9% to 102,170 units. Again the VW diesel scrappage, although it has now ended, was a strong one and this will have fuelled sales momentum into February with cars ordered at the end of last year. At the same time the new Polo and the very-well received T-Roc will continue to generate strong interest from private buyers as the year wears on. The second best-selling brand during the month was for once not Mercedes-Benz but Audi, which beat Mercedes into third. However, this was due to a very high base comparison last February when Audi was offering strong incentives and offers. As a result there was a slump in momentum during the month in terms of relative growth, although sales were still relatively strong, with sales falling 3.6% y/y to 23,510 units. The introduction of the new A6 at this week's Geneva Motor Show will give the brand a powerful new weapon to take on the Mercedes-E-Class and BMW 5-Series, while the Q4 crossover will also debut later in the year. In addition, the E-Tron Quattro will be launched later this year. It will not be high-volume, but it will be an important model in Audi's electrification strategy and an important brand-builder. The 44,452 units Audi recorded in the first two months of the year was a 3.3% y/y decline in sales. Mercedes-Benz posted a 0.7% y/y decline in sales for January to 21,910 units, as demand plateaued ahead of the launch of the brand-new A-Class and the revised C-Class, both of which will be shown at the Geneva Motor Show, with sales rising by 0.7% y/y. Sales in the first two months of the year increased by 4.8% y/y to 48,329 units. Ford beat Opel to fourth spot, in turn knocking BMW down to sixth on the February best-sellers' list. Ford outsold Opel by a mere 40 units during the month, with a figure of 19,258 units to 19,218 units, which equated to a growth rate of 7.4% and 6,7% y/y respectively. BMW's sales fell away by 0.7% y/y to 17,664 units with demand falling as a general trend for its ageing core passenger car ranges, the 1-Series and the 3-Series, which will be replaced this year and next year respectively. In terms of import brands Skoda led the way with a 6.3% share and 17.8% growth. Renault (3.8%/+ 12.2%) and Hyundai (3.0%/+ 9.7%). The clearest increase in registrations in terms of percentage growth was the DS brand with a 128.6% rise.
Outlook and implications
February was another robust month of growth for the German passenger car market. However, there is likely to be some "pull-forward" effect on sales as a result of the various diesel scrappage schemes. These brought private buyers into showrooms in order to get the favourable deals and subsidies that were being offered on Euro 4 and older diesel trade-ins. This pull-forward effect is likely to mean some slowing momentum later in the year as the orders from the scrappage schemes begin to dissipate. The German economy is still in a very strong shape and there are high levels of consumer and business confidence, which are likely to be further bolstered by the news on 4 March that the Social Democrats had voted in favour of a new ruling coalition with Chancellor Angela Merkel's CDU party. Domestic demand will remain the most reliable contributor to German GDP growth in 2018, we regard the stagnation of private consumption and the modest decline in construction investment observed during the second half of 2017 as temporary. Furthermore, as global uncertainty levels have waned (the election of Emmanuel Macron to the French presidency; prospects for US economic policies under Trump become clearer; Brexit ramifications increasingly appear manageable for UK trading partners – even in a worst-case "no-deal" scenario), investments in equipment and exports are concurrently strengthening. Consumer confidence recently climbed to a 16-year high and registered unemployment has dropped to a post-unification and thus 27-year low of 5.4%. Notwithstanding previously mentioned protectionist risks, exports to the UK and the US have not suffered unduly as yet, although there could be more of an effect during 2018. Separately, global demand and trade have been picking up throughout 2017. Despite the unexpected extent of euro appreciation in 2017, German export growth has doubled compared with 2016. In turn, this has boosted imports of intermediate inputs, and accelerating import growth in general has limited the 2017 net export contribution to GDP growth to 0.2%. In 2018, export growth should outperform import growth slightly, leading to a net export contribution of about 0.5%. For the full year IHS Markit is forecasting sales growth being limited to a tiny proportion with sales rising from 3.44 million units to 3.46 million units.
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