IHS Global Insight Perspective | |
Significance | The Italian and French markets recorded declines in 2010, while the Spanish market posted a moderate increase. |
Implications | The withdrawal or reduction of scrappage incentives during the year blighted these markets, despite the French market putting in a relatively strong performance during the final month as automakers sought to counter the ending of the government programme with their own schemes. |
Outlook | The declines witnessed during the latter stages of 2010 will no doubt continue to some degree into 2011, when all three markets will suffer from a high base of comparison due to the 2010 incentives. |
France
The French passenger car market declined by 2.2% year-on-year (y/y) during 2010, affected by the reduction in scrappage incentives and other government support measures. According to the latest data published by the CCFA trade association, sales fell from the almost record-breaking level of 2.30 million units in 2009 to 2.25 million units. This decline came despite a relatively strong performance in the final month of the year, when the market fell just 0.7% y/y to 228,383 units in spite of the high base of comparison as customers sought to derive maximum advantage from the schemes in place. However, when taking into account calendar effects—there were 23 days in December 2010 instead of 22 in December 2009—the market declined by 5.0% y/y.
The domestic automakers saw mixed fortunes over the course of the year. Last-gasp incentives supported the two PSA brands in December. Citroën posted the biggest gains in the month, recording a sales increase of 7.9% y/y to 29,718 units, although over the course of the year its sales still declined by 5.3% y/y to 328,152 units. Peugeot on the other hand recorded a smaller increase of 4.1% y/y in December, but it managed to achieve a full-year gain of 2.2% y/y to 400,673 units. However, despite its best efforts, Renault's sales fell by 7.3% y/y in December, resulting in its full-year sales falling by 3.7% y/y to 497,836 units. However, the impact on its overall group sales was alleviated by the Dacia brand, which achieved growth of 70.9% y/y over the course of the year to 104,624 units, resulting in the French automaker's overall sales rising by 4.2% y/y to 602,478 units. It was a similar picture across much of the rest of the market, with several automakers recording slight growth, including General Motors (GM) Europe (up 4.3% y/y), driven by Opel's gain of 6.3% y/y, while Nissan reported double-digit percentage gains.
Italy
Having suffered a decline in demand ever since the second quarter, the Italian market fell 9.2% y/y during 2010. The number of registrations recorded by the Ministry of Infrastructure and Transport fell from 2.16 million units to 1.96 million units during the year. This was not helped by a decline of 21.7% y/y during December, when sales fell to 130,319 units. However, when taking into account calendar effects, this decline reached 25.1% y/y. As a result of it being the key automaker in the market, the Fiat Group led the field with a market share during 2010 of 30.1%, although this marks a fall from 32.8% in 2009. The core Fiat brand also continued to lead the market but its sales decline over the course of the year outpaced that of the market as a whole, coming in at 18.1% y/y to 450,384 units. Many other popular brands also suffered varying degrees of decline over the course of the year, including Ford, Toyota, Peugeot, and Citroën.
Spain
The ending of the Plan 2000E scrappage incentive programme and an increase in value-added tax (VAT) in July 2010 had a noticeable impact on the Spanish market, according to passenger car data published by ANFAC. Although year-to-date growth in the market had reached double-digit rates by the mid-year point, the subsequent declines meant that full-year sales rose by just 3.1% y/y to 982,015 units. This was not helped by a decline of 23.9% y/y in December to 68,942 units; when taking into account the additional working day during December 2010, this decline increases to 27.2% y/y. During the year, local automaker SEAT was the top-selling brand with 89,392 sales, with stable-mate Volkswagen (VW) following in second place.
Outlook and Implications
Given the support that the French market earlier received from the government, it comes as no surprise to see that it was hurt when these measures were reduced during the course of the year. However, the final month was better than expected despite the very high base of comparison a year earlier thanks to the incentives offered by various automakers to attract customers (see France: 24 December 2010: French Automakers Expecting Bumper Domestic Demand in Final Week of 2010). The impact of orders received in the final month of 2010 should spill over into the first quarter of 2010. This was noted by the CCFA, a spokesman for the organisation telling Reuters that, "December orders were very good, but that is not necessarily reflected in sales." He went on to say that the "first quarter of 2011 should be rather good". Indeed, Renault's commercial director for the French market, Bernard Cambier, told BFM radio, "It [December] was an absolutely phenomenal month: we had a market of orders for 370,000 cars, which allows us to start the year with a very comfortable order book." He added that this level was 30% greater than that in the same month a year earlier. However, despite this good news, the later months of 2011 are likely to prove difficult thanks to the high base of comparison. Cambier said that despite this early growth, Renault is expecting to see the French market fall by between 10% and 13% in 2011, although at the lower level this would mark a return to the average for the past decade. IHS Automotive agrees with this expectation, anticipating for now that the market will decline by around 10% y/y during 2011, before maintaining sales around the 2-million-unit mark for at least the next five years.
Given the early withdrawal of its scrappage incentives, it comes as no surprise that the Italian market saw the worst decline of these three markets during 2010. Although this decline was expected, this shortfall compared with a year earlier, particularly for market leader Fiat, is a terrific loss for any business, and the monthly declines of late have almost been on a par with the declines witnessed in the pre-incentive climate of early 2009. Indeed, Fiat has already undertaken measures to reduce output at various facilities during this year. The chances of growth are not being helped by the economic situation in Italy, which could be held back by the faltering growth of the manufacturing sector. There has been an improvement in business confidence, but it is well below historical norms. Consumers are also spending cautiously against a backdrop of higher unemployment and weak income developments, and this trend is expected to continue. In addition, the government has pledged to implement painful austerity measures in 2011 and 2012 as it seeks to cut Italy's high public debt level. The difficulties are expected to continue into 2011, and although IHS Automotive expects the market to see a small increase during the year, it will remain below the 2-million-unit mark, and well below the 2.3-million-unit average seen between 2003 and 2007. We also believe that it will be several years before the market gets close to its pre-crisis levels.
Despite being the only market of the three to record a gain during 2010, the Spanish market also suffered a notable hit from the withdrawal of incentives at the beginning of July. As noted above, as well as the ending of the scrappage incentive, the market has also been affected by a 2.0-percentage-point increase in VAT. The country remains plagued by economic woes, although it is expected to avoid a technical recession. It is not being helped by excessive levels of private debt and a troubled property market. Consumers also have concerns over job security as unemployment is expected to have reached 20% in 2010, and the government will struggle to reduce this level. In addition, the government has implemented tough austerity measures. These factors will not help the Spanish passenger car market, which IHS Automotive forecasts will slide by almost 7% y/y this year, down around 40% compared with pre-crisis levels, with an extremely slow recovery to follow.