Regional Sales Edge Up In Line With BMI View

Passenger car sales in the European Union (EU-27) declined 6.6% year-on-year (y-o-y) in the first six months of 2013, to 6,204,990 units. This follows a 5.6% y-o-y fall in June. Generally, much of the sales drop this year has been led by substantial declines in Western European markets, which constitute a large percentage of total regional sales, although many of the smaller markets of Central and Eastern Europe (CEE) have als o fallen sharply over H113 .

BMI maintains a generally bearish view on passenger car sales across Europe over the year, although we expect the falls to less than in 2012. This view is playing out. Generally, the macro outlook for much of the region remains poor, although our view on private consumption in some markets is improving somewhat from last year. We have previously highlighted that the 'risks to our forecasts remain firmly to the downside, as a further deterioration in the region's macro picture could further dampen sales.' We caution that sales could decline further later in the year on the back of these dynamics.

In 2012, passenger car sales in Europe decreased 8.2%, to 12,053,904 units. The falls were mainly in Western Europe, where there was a marked difference in sales volumes and the direction of change with the CEE region.

Bearish Forecast Playing Out
Germany Monthly Passenger Car Sales, CBUs

Passenger car sales in the European Union (EU-27) declined 6.6% year-on-year (y-o-y) in the first six months of 2013, to 6,204,990 units. This follows a 5.6% y-o-y fall in June. Generally, much of the sales drop this year has been led by substantial declines in Western European markets, which constitute a large percentage of total regional sales, although many of the smaller markets of Central and Eastern Europe (CEE) have als o fallen sharply over H113 .

Bearish Forecast Playing Out
Germany Monthly Passenger Car Sales, CBUs

BMI maintains a generally bearish view on passenger car sales across Europe over the year, although we expect the falls to less than in 2012. This view is playing out. Generally, the macro outlook for much of the region remains poor, although our view on private consumption in some markets is improving somewhat from last year. We have previously highlighted that the 'risks to our forecasts remain firmly to the downside, as a further deterioration in the region's macro picture could further dampen sales.' We caution that sales could decline further later in the year on the back of these dynamics.

In 2012, passenger car sales in Europe decreased 8.2%, to 12,053,904 units. The falls were mainly in Western Europe, where there was a marked difference in sales volumes and the direction of change with the CEE region.

Increasingly Bearish On Western Europe

Across Western Europe, we generally forecast a continuation of the declines in vehicle sales witnessed in 2012, albeit at a slower rate. We have previously highlighted that we 'expect such declines to moderate somewhat from the sharp fall in Q113', and this is playing out. However, vehicle sales in many markets continue to drop, and the consumer outlook is still generally poor across the region, despite modest improvements.

In Germany, passenger car sales fell 8.1% y-o-y in H113, to 1,502,630 units. BMI forecasts a 10.0% decline in this market in 2013. We expect private consumption to improve somewhat over the course of the year, although we do not see much scope for a large resurgence in big-ticket items. We believe that this will serve to moderate passenger car sales growth somewhat over the year, and has informed our sales forecast.

In Spain, sales fell 4.9% y-o-y, to 386,383 units in H113. On the back of an increasingly bearish consumer outlook, we forecast a 9.0% decline over the year.

In France, sales declined 11.2% y-o-y in the first half of 2013, to 931,476 units. BMI believes that rising unemployment, low consumer confidence, stagnant real wage growth, and the increasing likelihood of a slowdown in the housing market are all liable to keep private consumption subdued in 2013. On the back of this weak consumer outlook, we forecast a decline of 12% in the passenger car market over the year.

Regional Bright Spot
UK Monthly Passenger Car Sales, CBUs

In Italy, sales declined 10.3% y-o-y in H113, to 731,203 units. BMI believes that private consumption will continue to contract in 2013 as Italian households are hit by ongoing austerity measures, including higher taxes and cuts in social spending. Accordingly, we forecast a 10.0% decrease in the market in 2013.

The declining sales volumes witnessed across many markets across the region have led to substantial overcapacity problems for a number of auto manufacturers in the region, prompting job cuts and factory closures. We expect this trend to continue into 2013 at the very least as companies continue to struggle in the region.

The UK remains the one bright spot in the region, however. Passenger car sales increased 10.0% y-o-y in H113, to 1,163,623 units. The market has seen modest improvements in private consumption, price cuts from car sellers, and pent-up demand among consumers. On the back of this bullish outlook and strong sales to date, we forecast a 7.0% increase over the year.

Longer-Term Outlook

Several markets in this region have witnessed years of continuous sales decline. We expect these markets to bottom out in 2013, before posting modest sales increases in 2014. We believe that this represents a bounce-back effect from years of pent-up demand (and delayed purchasing decisions) in the market, rather than a return of consumer confidence ( see 'Western Europe 2013 Sales Outlook', December 27 2012).

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This article is tagged to:
Sector: Autos
Geography: Germany, Europe, Germany, Spain, France, United Kingdom, Italy, Europe, Europe
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