EU passenger car demand rises 13.7% y/y in November – ACEA

Passenger car demand growth in the European Union (EU) has improved significantly during November, according to the latest data published by the European Automobile Manufacturers' Association (ACEA). Registrations have increased by 13.7% year on year (y/y) to 1,085,259 units. This has helped the region's performance in the year to date (YTD) with registrations now standing at 12,603,855 units, an increase of 8.7% y/y. In addition, in the European Free Trade Agreement (EFTA) area – comprising Iceland, Norway and Switzerland – registrations have grown by 11.6% y/y to 39,705 units, while its registrations in the YTD are now up by 7.8% y/y to 441,936 units.

In line with the stronger growth this month, key markets in the region have all been lifted to some degree, although many of these have not been helped by one additional working day. This included both France and Germany, which rose by 11.3% y/y and 8.9% y/y, respectively. Spain and Italy's gains were even more impressive at well over 20% y/y as both are helped by a relatively low base of comparison, while Spain has also been supported by market incentives. Even the UK - which saw its 44-month run of growth broken in October - returned to growth this month with a 3.8% y/y lift.

Outside this group, strong gains have also been recorded. This has included the Netherlands (which is benefiting from a pull-forward due to impending tax changes) and Sweden (where registrations are powering ahead on positive economic factors), as well as Belgium, Denmark and Poland which also recorded double-digit percentage gains. Others have included Ireland, Portugal and a host of markets in Central Europe, which are continuing to record improvements following the Eurozone economic downturn and the low base of comparison.

While a strong improvement was recorded in the EU, this was not so much seen in the data for the largest OEM in the region, the Volkswagen (VW) Group which rose just 4.8% y/y. Its performance has not been helped by the Volkswagen (VW) or Audi brands which grew by 2.8% y/y and 4.4% y/y, respectively. Its only strong gainer this month has been the Skoda brand with an increase of 11.7% y/y. However, other OEMs saw far greater improvements this month. This includes PSA Peugeot-Citroën underpinned by Peugeot, while at Renault Group, the Renault brand also had a strong innings. Joining them were Ford (+20.5% y/y), General Motors' (GM's) Opel Group (+18.3% y/y) and Fiat Chrysler Automobiles (FCA; +18.6% y/y). Other premium OEMs and brands have also improved to varying degrees this month. BMW Group's uplift has been 10.1% y/y, and Daimler has increased by 22.8% y/y as both its brands have driven registrations. However, even better performances were recorded by Volvo and Jaguar Land Rover (JLR) with rises of 23.7% y/y and 70.0% y/y, respectively.

Outlook and implications

After slowing down in October, registrations in Europe returned to a more usual and clearly positive trend in November. According to Carlos Da Silva, manager for IHS Automotive's European light-vehicle sales forecast, there has been to some degree a "mirror effect" as the calendar effect from October became more favourable in November. As a result, the gains should be taken with a grain of salt as it essentially compensated for the relatively weak results in October, with this illustrated by the example of Germany or France which recorded disappointing performances last month.

Da Silva notes, "The fact is, when considering the SAAR [Seasonally Adjusted Annualized Rate], the European market is no longer showing the same impetus as in the recent past. This is not saying that the market is not growing anymore or will stop growing shortly but that its rate has decelerated somewhat lately." However, this change has not happened overnight. Indeed, strong pent-up demand built up during the earlier crisis is still feeding the market but we might be entering a phase where the most urgent needs have been satisfied. This is certainly true in the UK where after 3.5 years of constant growth private demand is clearly levelling off. Also, demand has been supported by other channels as the short-term rental-, dealer- and OEM-self-registered cars have been at a high level throughout the year, notably Germany and France. He adds that this essentially shows that the European market is still on a fragile trajectory, and while the parc in various countries throughout Europe still needs renewing, demand remains very far from its pre-crisis levels. The economic and social conditions, although they are better compared to recent years, do not provide sufficient traction to the passenger car markets, with unemployment rates remaining stubbornly high, wage gains remaining limited and credit being still hard to secure in many countries. The impact of the recent events such as the refugee influx and terrorist attacks in Paris (France) are yet to be seen.

All in all, this justifies that the market should keep on growing thanks to the relatively natural need for renewal but that, at the same time, it is not expected to be able to accelerate or even maintain the vigour it has displayed during the past 12–18 months. IHS Automotive currently forecasts that passenger car registrations in the EU will grow by around 8.0% y/y during 2015 to almost 13.6 million units. However, we see this rate of growth slowing in 2016 to around 1.5% y/y, although the market will continue to gain until the end of the decade when we see registrations reaching over 14.4 million units.

With regards to the situation with the VW Group and its diesel emissions saga, we are just starting to see its impact reflected in the registration numbers. So far, the impact is quite limited: VW is definitely underperforming the market but not in a catastrophic way. At the very least, this is not totally attributable to the diesel saga. For months now - predating the scandal - VW has been in a weakening position that is essentially linked to a less favourable product cycle. For example the bestsellers, Polo and Golf, are ageing and the brand is still at a temporary disadvantage in the hot crossover segments: the Tiguan is undertaking replacement while there is still no small VW sport utility vehicle (SUV) in sight to compete against the likes of Nissan's Juke, Renault Captur and Peugeot 2008. However, November has certainly shown that the damage has started: the brand was down in major (and growing) markets like Germany and the UK. This does not necessarily mean customers are punishing the brand but, most certainly, they are adopting (at least for now) a wait-and-see attitude until they can assess properly the actions of the brand. Any clarification or, better still, any clear roadmap provided by VW would definitely help in this context.