European Passenger Car Sales Fall 9.6% in September, According to ACEA Data

Passenger car sales across Europe in September slowed down from the accelerated declines that were recorded in July and August, with sales declining 9.6% y/y during the month to 1,227,645 units, according to the latest set of data released by Association of Automobile Manufacturers Association (ACEA). There were no significant calendar effects on the European market in September, which was the sixth consecutively monthly decline in Europe as a result of the withdrawal of the successful scrappage schemes that were rolled out across Europe's major passenger car markets; they had continued through into the early months of 2010, with the notable exception of Europe's biggest single passenger car market Germany. In terms of the year-to-date (YTD) sales volume tally for the first three quarters of the year, the market declined by 4.3% y/y to 10,251,140 units, with the declines recorded in July, August and September putting the overall European market firmly into negative territory.

In terms of the major European passenger car markets, the overall performance continues to be dragged down by Germany, its biggest single market which exhausted its extremely successful scrappage funding in September 2009,. The extremely high base effect caused by the scrappage scheme is beginning to moderate somewhat, with the September sales volume declining by 17.8% 259,748 units. This is a significant lower decline than the 27-30% declines that were recorded between March and August as a result of the high base comparison. For the YTD the German market is still recording an accelerated decline of 27.5% y/y to 2.16 million units. In the United Kingdom, the end of scrappage has seen a moderate effect on sales declines, with volumes falling 8.9% y/y to 335,246 units. However, scrappage momentum in the early part of the year has maintained a growth level of 7.7% y/y for the first nine months of the year to 1,635,659 units.

Passenger car sales in France fell for the fifth month in succession during September as the high base of comparison and the reduction in market support incentives continued to have an effect. Sales fell by 8.9% year-on-year (y/y) to 169,994 units, from 185,054 units a year ago. Sales growth during the first three quarters of 2010 has now risen by just 0.8% y/y to 1.66 million units. With only three months of 2010 left to run, this could well slip into deficit before the end of the year. The Italian passenger car market ended the third quarter with a continuation of the declining trend that began at the start of the second quarter. The number of registrations reached 154,429 units during the month, a decline of 18.9% y/y. This means that the YTD decline has widened further: during the first nine months of 2010, sales fell by 4.4% y/y to 1.54 million units The passenger car market in Spain ended September with a further drop, resulting in a clean sweep of declines for a quarter during which the government ended its Plan 2000E scrappage incentive programme and increased value-added tax (VAT). As a result the passenger car market declined by 27.3% y/y to 56,595 units last month. However, the earlier strength of the market resulting from this scheme and the especially low base of comparison is evident in YTD growth, which remains at 16.2% y/y, with sales for the first three quarters of the year standing at 787,501 units.

In vehicle group terms, Volkswagen (VW) retained its customary position as the region's largest vehicle manufacturer by sales and it continued to marginally outperform the overall market decline in September, with sales declining by 5.0% y/y to 254,039 units, a result which increased VW's regional market share by 1% to 20.7% in comparison to the same period last year. For the YTD, the VW Group's sales declined by 4.3% y/y to 2.17 million units. This decline matched that of the overall market during the first nine months of the year. Second placed PSA Group recorded a 7.3% y/y decline in September, which was again ahead of the overall market decline and helped to lower the positive growth rate the OEM generated in the first nine months of the year down to o.4% y/y, which generated sales of 1,393,914 units. In terms of actually growing market share in Europe, the third best-selling OEM Group, Renault, has been one of the most successful companies operating in Europe in 2010. However, the manufacturer recorded a larger decline in volume that PSA or VW during September, with sales falling 8.9% y/y to 117,288 units. However, the company actually generated growth of 10.5% y/y for the YTD. This improved Renault's market share in Europe to 10.3% during the YTD, up from 8.9% at the equivalent point last year as the company chases volumes through generous incentives programmes. One of the worst performing OEMs in September and during the YTD has been Fiat. As one of the main beneficiaries of the various European scrappage incentives as a result of its wide range of small cars, Fiat has seen a corresponding slump in sales as the incentives have ended. In September, Fiat's sales actually declined by almost a quarter to just 85,134 units, while the YTD tally fell to 808,943 units, a fall of 14.8% y/y.

Outlook and Implications

In the first half of the 2010 calendar year, the European passenger car market matched the performance of the first half of the year, partly because of the residual effect of scrappage schemes that ran on into the early months of 2010. However, during the summer months the market has fallen into decline as the scrappage schemes have run their duration or exhausted funding. Together with the traditional summer slump in sales, this led to an accelerated decline over July and August and pushed the region into a YTD decline for the first nine months of the year of 4.3%. However, the base effect comparison will moderate in some markets in the remaining months of the year, especially in Germany. The general economic environment in the European Union (EU) remains somewhat uncertain, and any wider recovery in the Eurozone economies is likely to remain fragile and easily deflected,

There of course remain ongoing concerns relating to particularly weak economies within the Eurozone that have had large levels of public borrowing and debt viciously exposed by the financial downturn, with economies like Greece and Hungary falling into this category. The full effects of the EU-led 750-million-euro bailout on these countries and other indebted nations that was announced in May, with Greece, Spain, Italy and Portugal having already having announced austerity packages, have yet to be fully processed. The United Kingdom is also set to announce its strategic spending review in the next two weeks.

So once these factors are taken into account the overall short- and medium-term outlook for the European market remains, at best, somewhat flat. It was noticeable that many chief executives and senior management figures at the recent Paris Motor Show were presenting a very cautious outlook for the European market in the final third of 2010 and moving into 2011. Currently, IHS Automotive forecasts that passenger car sales in Western Europe will slide by around 7.1% y/y to approximately 12.6 million units during 2010. However, the actual decline is far greater when it is remembered that sales reached a peak of 15.6 million units just three years ago. The market should begin to crawl back up over the next few years, although it will be at least five years before it comes close to returning to the pre-crisis peak of 2007.