EU passenger car registrations grow 4.9% y/y during November – ACEA

IHS Markit Perspective

Implications: Passenger car registrations in the European Union have recorded a further improvement during November, of 4.9% y/y.

Outlook: The improvement during November has been due to several factors and despite at least one less working day in most markets. However, IHS Markit still expects that passenger car registrations in the EU will fall in 2019, 2020, and 2021.

Passenger car registrations in the European Union (EU) have recorded further growth during November, according to the latest data published by the European Automobile Manufacturers' Association (Association des Constructeurs Européens d'Automobiles: ACEA). Demand grew by 4.9% year on year (y/y) to 1,175,959 units. The latest gain has meant that the decline in the year to date (YTD) has been further reduced, ending the 11-month period down by just 0.3% y/y at 14,123,228 units.

Passenger car registrations in the European Free Trade Association (EFTA) - made up of Iceland, Norway, and Switzerland - fell back last month though, down by 6% y/y to 34,901 units, as a result of a downturn recorded in Norway. The decline this month brings the region down by 1.5% y/y in the YTD at 418,898 units.

Again, only four of the five biggest passenger car sales-volume markets in the EU recorded gains during November. Leading the way was Germany with registrations of 299,127 units, up 9.7% y/y. In addition, registrations increased by a more modest 0.7% y/y in France, while in Italy and Spain, registrations were up by 2.2% y/y and 2.3% y/y, respectively. The exception was the United Kingdom, where registrations dipped by 1.3% y/y, as the market has been beset by a range of domestic factors, not least uncertainty related to both Brexit and the general election last week.

Much of the remaining market in the EU saw registrations grow by varying degrees last month. The biggest improvement was in Romania, where it jumped by 57.7% y/y due to a slump a year earlier. Other significant gains this month have included Lithuania, Hungary and Sweden. Sweden was hit by the hangover from the change to a new bonus-malus tax that was introduced in July and had a massively disruptive effect on the market as customers pulled forward registrations before its introduction. Some of the growth recorded this month may also be linked to further changes to the scheme, which will increase costs to consumers when the measure of CO2 shifts from NEDC to WLTP. Ireland's registrations also did well in November, although this month is typically a low-volume one, with most registrations taking place around the age-related registration-change months of January and July.

At an OEM level, one of the biggest gains was recorded by Volkswagen (VW) Group, which increased by 13.4% y/y to 301,524 units. It was one of the worst hit by the transition from NEDC to WLTP, as evidenced by the 38.3% y/y leap recorded by Audi to 51,421 units, while Porsche jumped 290.3% y/y to 7,455 units, as it also benefits from the now available facelifted Macan and latest-generation 911. VW brand registrations rose by 9.7% y/y to 145,057 units, helped by the new VW T-Cross and despite the Golf being on the verge of replacement. SEAT has also increased by 11.1% y/y to 38,464 units, although Skoda slipped by 1.2% y/y to 58,847 units, possibly affected by the new next generation Octavia being just around the corner.

In second place was Groupe PSA, although its registrations fell 7.2% y/y to 171,932 units, as most of its brands declined to some degree. Peugeot was its biggest selling brand with 73,961 units, although this was a dip of 0.2% y/y, and it may not be helped by it shifting two sub-compact models, the 208 and 2008, to new generation models. Citroën also slid by 0.4% y/y to 42,865 units, while Opel Vauxhall slumped by 21.5% y/y to 50,996 units as it moves over to the new-generation Corsa as well as dropping some other models in certain markets. The only gain came from DS Automobiles, which has grown by 33.7% y/y to 4,110 units, underpinned by the introduction of the new DS3 Crossback.

Renault Group's registrations rose 4.3% y/y to 119,998 units, it was a mixed month for its key brands. Renault made a strong contribution, as it increased by 12% y/y to 78,664 units. It may have been helped by the transition to the fifth-generation Clio, but it is also preparing to introduce the second-generation Captur. However, Dacia was down by 7.7% y/y to 40,819 units.

Elsewhere, it was a mixed bag of performances last month. Hyundai Group's registrations increased by 7.6% y/y to 80,674 units, as both brands made a positive contribution, while Toyota Group improved 6.9% y/y to 59,191 units, as new models helped to lift sales of both the Toyota and Lexus brands. Ford was up by 3.8% y/y to 72,717 units. However, Fiat Chrysler Automobiles (FCA) fell by 1.4 y/y to 66,334 as Jeep slumped, while Nissan's sales dipped by 1.2% y/y to 25,392 units, as the second-generation Juke only started reaching dealers in December.

As for the premium OEMs, Daimler had a stronger month, with its sales growing by 7.2% y/y to 85,921 units in November, as a small gain by the Mercedes-Benz brand was bolstered by a 60.7% y/y jump by Smart as its ICE models are registered before it becomes an electric-only brand. BMW Group's registrations increased 0.3% y/y to 82,355 units, as Mini proved to be a drag on its performance. It was also not a great month for Jaguar Land Rover (JLR), which was down 15% y/y to 16,429 units. However, Volvo Cars' registrations increased 2.7% y/y to 26,962 units.

Outlook and implications

The gain in passenger car registrations in the EU last month came despite there being one less workings day in most markets. However, markets are also still experiencing some benefit from the hangover from the transition from NEDC to WLTP on 1 September 2018 mentioned above. This came not only from pre-registering NEDC stock before the deadline, but also some OEMs being unable to offer a fully compliant range of vehicles until some time after the deadline, leading to struggles for some OEMs to the end of last year and beyond.

The November figures were also affected by OEMs pushing new models, which will be more positive contributors to fleet 2020/21 emissions targets. However, OEMs are also pre-registering some vehicles that will hinder meeting this target which are currently in their inventory. This could also affect December, alongside customers pulling forward purchases in some markets to avoid stiffer taxes on high emission vehicles, with France and Sweden being two where this will happen.

Looking forward to December, while a low base of comparison should have a positive impact on registrations along with some pull forward, IHS Markit does not expect that this to bring the market as a whole back into positive growth territory. Indeed, we currently see registrations reaching around 15.21 million units by the end of the year.

Looking beyond the end of 2019, a further decline is expected during 2020 and 2021, before a recovery starts in 2022. There also remains the ongoing uncertainty over Brexit. While this will be addressed partly by the outcome of the UK general election during December 2019, which will almost certainly see the Withdrawal Agreement approved before the current Brexit deadline of 31 January 2020, it also opens up a new level of uncertainty given that it will lead in to trade negotiations with the rest of the EU, with the strategy seemingly being that this should be completed by the end of 2020.

Posted 17 December 2019 by Ian Fletcher, Principal Analyst, Automotive, IHS Markit