German passenger car registrations fall 7.3% in January
The German passenger car market posted a 7.3% y/y decline in registrations to 246,300 units in January as the market contracted following a push by many brands to register many of their higher-emitting models ahead of the implementation of the European Union's new emissions directive, which will impose fines if an OEMs fleet average emissions exceed 95g/km. The new directive is being introduced in a staged fashion; 95% of fleet sales count towards the 2020 total (with the 5% of fleet sales that are the most emitting vehicles being omitted from this year's total) before 100% of fleet sales are tallied up from 2021. Alternative powertrains witnessed a big growth spurt during the month. Pure EV sales rose 61.2% y/y to 7,492 units, which means that they accounted for 3.0% of new registrations. Hybrid sales of 30,805 units were up 103.1% y/y, including 8,639 plug-in hybrids (+307.7%). The total hybrid share was 12.5%, the share of plug-in hybrids was 3.5%.
On a brand-by-brand basis, leading OEM Volkswagen (VW) at least performed better than the overall market with a 4.1% y/y decline to 48,744 units. The brand is likely to experience some volatility in terms of registrations over the next few months as the new Mark 8 Golf is rolled out and stock of pre-registered Mark 7.5 models is unwound. Mercedes-Benz was the second best-selling brand during the month; its sales rose 2.9% y/y during the month to 26,034 units. Strong demand for sport utility vehicles (SUVs), including the all-new GLB SUV-C model, and the company's compact car range will continue to benefit the brand as the year rolls on. Audi was in third place with a 1.2% y/y increase to 22,066 units. The brand will also receive a boost later in the year when the new A3 is rolled out. BMW enjoyed a very strong month as sales of the new 1-Series are now fully on stream and strong demand continued for the brand's SUVs. As a result, BMW sales were up 6.5% y/y during the month to 20,454 units.Outlook and implications
The German passenger car market's relatively big dip in January is a harbinger of a potentially tricky year ahead in 2020. The January fall is similar in scope to what has already been seen in France, Spain and Italy and is in line with a pull-back effect in those market as a result of the pre-registration of vehicles that would worsen an OEM's average CO2 emissions in Europe under the new targets that will measure 95% of vehicles (excepting the highest emitting 5%) for fleet average emissions in meeting the new EU directive of 95g/km fleet average emissions before fines are imposed. From 2021, 100% of an OEM's sales will be included in the fleet average emissions total. Any OEM posting an average fleet emission of above that level will incur fines. The German market will get some significant stimulus from key new model launches this year with the launch of the Mark 8 Golf and its sister models, the fourth-generation Skoda Octavia and the fourth-generation SEAT Leon. In addition, models like the new Opel Corsa and new additions to Mercedes-Benz's compact car range will encourage footfall through dealerships. Looking at the recent development of the macro picture, indicators have remained mixed in recent weeks (the most recent figures for November on merchandise exports and manufacturing orders corrected downwards; production and retail sales rebounded). Therefore, IHS Markit continues to expect net negative growth in the second and third quarters of 2019 to have been followed by stagnation in the fourth quarter, and that the anticipated recovery in 2020 will happen very slowly. Leading indicators, while displaying an upward tendency during the fourth quarter of 2019, still reflect recessionary conditions in manufacturing. It will require a major reduction in political uncertainty linked to global trade conflicts, geopolitical tensions, and Brexit to boost near-term growth prospects significantly. As a result this environment has the potential to have a negative effect in general consumer confidence as 2020 rolls on. As a result IHS Markit forecasts at this early stage that 2020 passenger car sales in Germany will decline from 3.36 million to 3.19 million.
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