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The Western Europe passenger car market posted an accelerated
decline in March as a result of the coronavirus disease 2019
(COVID-19) virus outbreak that has swept across the region during
the month, with a 52.9% year-on-year (y/y) decrease to 772,890
units, according to the latest IHS Markit forecast. This figure
brought the fall for the first quarter of the year to 27.1% y/y,
2,761,655 units. The huge decline in registrations due to regional
lockdowns had a corresponding impact on the seasonally adjusted
annual rate (SAAR), which dropped to a record low of 6.664 million
units; this compares to 10.945 million units at the height of the
2008/09 crisis. The final trend cycle fell to 13,008 million
units.
The French passenger car market has slumped
considerably during March following the restrictions imposed by the
French government to prevent the spread of the COVID-19 virus
during the month, registrations have dropped from 225,818 units to
just 62,668 units, a fall of 72.2% y/y. Year-to-date (YTD)
registrations are now down by 34.1% y/y to 364,679 units.
German passenger car registrations have fallen
by 37.7% y/y during March to 215,119 units. This left the
registration figure for the first quarter down by 20.3% y/y to
701,362 units.
Italy's passenger car registrations have
plummeted by 85.4% y/y during March. Demand fell to just 28,326
units against 194,302 units in March 2019. As a result, the
market's performance in the YTD is down by 35.5% y/y to 347,193
units.
It was a very similar picture in the Spanish
market, although the decline was slightly less extreme;
registrations have dropped by 69.3% y/y to 37,644 units. This has
now meant that its YTD stands at 218,705 units, a decline of 31%
y/y.
In the UK, passenger car registrations have
dropped by 44.4% y/y during what is typically one of the biggest
selling months of the year, down from 458,054 units to 254,684
units. Of this total, private registrations made up 132,281 units,
a decline of 40.4% y/y, while fleet registrations retreated by
47.4% y/y to 117,557 units. However, the biggest contraction has
been among business customers, down 61.1% y/y to 4,846 units.
Outlook and implications
In the French market, March already had the
potential to be a challenging month for OEMs with a second change
to the CO2-based bonus-malus in three months taking place at the
start of the month. However, measures implemented by the French
government to prevent the further spread of the COVID-19 virus have
overtaken this. As the number of cases and death rates grew during
the month, the government had already started to advise working
from home and reducing unnecessary travel and contact. However, by
the middle of March, President Emmanuel Macron announced a national
lockdown, restricting movement from 17 March for 15 days. This
effectively ended vehicle sales for the remainder of the month
after previous measures had already reduced footfall. The
restrictions have also coincided with the end of the quarter, which
is typically a high registration volume period as tactical
registrations take place with dealers to meet targets, which will
have caused a further drag on volumes. IHS Markit currently expects
the French passenger car market to fall by around 13.5% y/y to 1.91
million units during 2020, a far deeper decline than previously
expected, with a slow recovery to follow. We also anticipate that
registrations of LCVs with a GVW of under six tonnes will decline
by over 14% y/y to 412,200 units. However, our analysts are also
continuing to monitor the situation as it evolves, particularly
given the fluidity of the restrictions, and we will provide further
updates in the days and weeks to come.
Compared to the declines in France, Germany's
retreat has been less marked. However, this may be partly because
it implemented lockdown measures later than these markets. It only
announced a national curfew on 22 March, following the state of
Bavaria, which became effective on 21 March. Under these measures,
citizens are only allowed to leave their homes for certain key
activities such as shopping for groceries and commuting to work,
and not in groups of more than two people if they do not share the
same household, although additional measures have been taken at a
state level. It is not clear when these measures will be lifted,
but alongside a more widespread testing regime and strict
quarantine measures, Germany has not suffered the same death rates
as other countries. The question now is how long these measures
will need to remain in force to keep these down and also prevent a
second wave of infections occurring. This will inevitably have an
impact on demand. IHS Markit currently expects that passenger car
registrations will fall by around 13% y/y to around 3.14 million
units.
It is no surprise that the Italian market has
seen such a huge drop as its government was forced to begin
enacting measures in late February, when lockdown and quarantine
measures were first introduced for 12 towns to the southeast of
Milan, which initially affected around 50,000 people. This already
led to a reduction in footfall to dealers on reduced confidence.
However, the lockdown was expanded on 8 March to include the entire
population of the Lombardy region and a further 14 provinces -
Modena, Parma, Piacenza, Reggio Emilia, Rimini, Pesaro and Urbino,
Alessandria, Asti, Novara, Verbano Cusio Ossola, Vercelli, Padua,
Treviso, and Venice - and two days later this was expanded to a
country-wide lockdown. Although some dealers had already chosen to
shut their doors, the government then mandated the closure of
non-essential businesses. Although IHS Markit forecasts currently
have registrations down by around 25% y/y during 2020 to around
1.44 million, the recent decision to extend the lockdown until
after Easter (12 April) will result in this being re-evaluated.
The Spanish government declared a State of
Emergency on 14 March because of the COVID-19 virus, effectively
bringing the passenger car market to a halt, resulting in around
half the month when registrations could not be made. This has also
now been extended until 11 April at the earliest. The impact on the
private and company car market is relatively similar, with falls of
67.5% y/y and 66.9% y/y. However, rental vehicles dropped by 74.9%
y/y as fleets were still in the process of stocking fleets with new
vehicles for the vacation season beginning during the Easter
holiday period in mid-April. Noemi Navas, the director of
communication for ANFAC, said that "we are facing a month and sales
records unparalleled in the history of registrations in Spain, as
we are also a country facing one of the most complex and harsh
health crises ever faced. Sales are paralyzed and this situation
will continue, at least, while the state of emergency lasts because
the main objective is to overcome the pandemic." However, she added
that ANFAC was already working on the "exit and recovery scenario".
Navas said, "At ANFAC, we think it is possible to quickly return to
where we were. We are going to need a shock plan to relaunch the
sector that includes specific measures for the automotive industry
that serve to quickly recover the market and production." Even so,
Raúl Morales, communication director of Faconauto added, "With
dealerships closed, we expect a non-existent market or one with
falls of close to 90% in the next two months." IHS Markit currently
anticipates that the Spanish passenger car market will fall by over
20% y/y to around 1.09 million.
For the UK, as mentioned above, March is
typically one of the biggest registration months of the year, due
to the age-related number plate change. However, the government
gradually ramped up measures to prevent the spread of the COVID-19
virus, beginning on 20 March and resulting in restrictions on
movement on 23 March, enforceable through the Coronavirus Act 2020,
which only allows citizens to leave their homes for shopping for
essentials, exercise and commuting for essential key workers. This
has also meant that orders could not be registered and delivered to
customers, although in some instances dealers had been giving
impressive discounts to move stock prior to the lockdown measures
being implemented. IHS Markit currently forecasts that
registrations in the UK during 2020 will fall by almost 12% y/y
given the already substantial retreat from its peak in 2016 on a
cooling economy and Brexit uncertainty.
IHS Markit analysts are continuing to monitor this very fluid
situation as it evolves, and we will provide further updates in the
days and weeks to come.
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