EU passenger car market grows 4.7% y/y during H1, more modest increase in June

14 Jul 2017 Tim Urquhart, B.A.

There are signs that the passenger car market in the European Union is losing momentum amid slowing sales in June and a modest increase forecast for the full year.

IHS Markit perspective

  • Significance: Registrations of passenger cars in the European Union has grown at the rate of 4.7% y/y in the first half of the year according to data published by ACEA.
  • Implications: This represents a healthy growth rate in line with the IHS Markit forecast although the uplift in June equated to a slower 2.1% y/y rise in sales to 1.49 million units.
  • Outlook: For 2017, IHS Markit currently expects that the passenger car market in the EU will grow by 1.5% y/y to almost 14.7 million units, an increase behind the 7.0% y/y improvement during 2016.

Passenger car registrations in the European Union (EU) rose at the solid rate of 4.7% year on year (y/y) in the first six months of the year to 8.21 million units, according to the latest set of data to be released by the European Automobile Manufacturers Association (Association des Constructeurs Européens d'Automobiles: ACEA). However, in June the pace of growth slowed compared to the previous five months to rise by just 2.1% to 1,491,003 units. In the European Free Trade Agreement (EFTA) market, which is made up of Iceland, Norway and Switzerland rose at a more rapid rate of 3.1% y/y during June to 49,296 units, although the first half result was below the overall rise in the EU market, with an 1.1% y/y rise to 250,555 units.

On a market by market basis, the region's biggest market Germany posted a 3.5% y/y decline during the month to 327,693 units as a result of a negative calendar effect, as there were two fewer working days this month compared to June 2016. The German market posted a 3.1% y/y increase to 1,787,026 units in the first half of 2017. France's growth rate was lower than it has been in recent months with an uplift of 1.6% y/y to 230,940 units in June, while in the first half sales rose by 3.0% y/y to 1,135,281 units. Italy saw an accelerated rise of 12.9% y/y in June to 187,642 units, with first-half sales rising by 8.9% y/y to 1,135,693 units. Spain was up by 6.5% y/y in June to 131,797 units while first-half volumes were up 7.1% y/y to 667,494 units. The UK, which has boomed in recent years, declined 4.8% y/y to 243,454 units in June, which pulled the market's first-half sales well into negative territory with a 1.3% y/y fall to 1,401,811 units. Outside the big-five markets there was a strong performance in Poland, with an 8.6% y/y rise during the month to 41,890 units and a year-to-date (YTD) rise of 17.2% y/y as robust economic growth boosted sales to 247,014 units. There were also accelerated rises in June and in the YTD in Romanian, Slovakia and Slovenia.

On a manufacturer by manufacturer basis, the first half of 2017 has not been wholly positive for the region's biggest brand, VW. Sales of the brand increased on a one-off basis in June in advance of the market with a 2.7% y/y rise in volumes to 335,915 units, helped partially by the launch of the new Mark 7.5 Golf and ongoing robust sales of the Tiguan. However, sales in the first half of the year rose at an appreciably slower rate than the rest of the market with a rise of 3.2% y/y to 1,911,302 units. Second-placed Renault group also underperformed the overall market in June with a 2.8% y/y increase to 179,068 units, while for the first half it strongly outperformed the overall market with a 6.9% y/y increase to 863,670 units. One of the strongest performers of the major vehicle groups in June and in the first half was Fiat Chrysler Automobile (FCA). Sales were up by 7.6% y/y to 104,796 units, largely thanks to strong sales of the core brand. YTD sales were also up at the robust level of 10.2% to 599,461 units.

Outlook and implications

The first-half performance in the EU passenger car market is one of solid growth, although we appear to be moving into a period of relative uncertainty and it would be a surprise if the growth during the first half of the year is maintained throughout the second half of the year. The first six months of the year have seen a great deal of variation in terms of monthly results, partly due to working day factors relating to Easter being in March in 2016 and April in 2017. This is worth up to two fewer days in some markets, which can cause large swings between artificially low and high base comparisons. In terms of the overall picture the EU's economy continues to develop well. The European Commission expects euro area GDP growth of 1.7% in 2017 and 1.8% in 2018 (1.6% and 1.8% in the Winter Forecast). For the combined EU as a whole GDP is expected to remain constant at 1.9% in both years (1.8% in both years in the Winter Forecast). However, inflation has risen significantly in recent months, mainly due to oil price increases. However, core inflation, which excludes volatile energy and unprocessed food prices, has remained relatively stable and substantially below its long-term average. Inflation in the euro area is forecast to rise from 0.2% in 2016 to 1.6% in 2017 before returning to 1.3% in 2018 as the effect of rising oil prices fades away. Private consumption and consumer confidence remains robust and Unemployment continues its downward trend, but it remains high in many countries. In the euro area, it is expected to fall to 9.4% in 2017 and 8.9% in 2018, its lowest level since the start of 2009.

For 2017, IHS Markit currently expects that the passenger car market in the EU will grow by 1.5% y/y to almost 14.7 million units, an increase behind the 7.0% y/y improvement during 2016.


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