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Western European passenger car market falls in March

07 April 2020 Tim Urquhart

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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