German passenger car sales down 1.2% y/y in September

The Volkswagen (VW) brand posted a performance in line with the overall market improvement in September with sales falling by just 2.2% year on year (y/y) to 50,242 units during the month. Germany's number one passenger car brand was bolstered by sales of the Golf, with deliveries of all the model variants, including the estate version now fully on stream. September's result meant that the year-to-date (YTD) decline for the first two-thirds of the year improved slightly to 8.6% y/y to 470,638 units. Mercedes-Benz retained the second spot, which it has held for the majority of the year. Its sales rose by 0.9% y/y to 22,839 units, continuing to be bolstered by the new A-Class and the revised E-Class, which have counteracted the declining sales of the C-Class which is soon to be replaced; the new version will debut at next year's Geneva Motor Show. The brand's YTD sales rose by 0.5% y/y to 212,066 units. Third-placed BMW suffered a decline of 3.9% y/y to 21,042 units, although the company is expected to see extra sales momentum in the final third of the year as result of the addition of the new X5 and the revised 5-Series. Audi was in fourth spot just above the second best performing top-ten OEM in September, Opel, which saw its sales rise by 13.2% y/y to 19,243 units, although this result was achieved by a large amount of incentive and discounting activity, with the company offering deals on the Astra and the run-out versions of the pre-facelift Insignia. The best performer in terms of y/y growth was Hyundai, which posted a creditable rise of 18.7% y/y thanks to strong sales of the iX35 and the i30.

Outlook and implications

It is expected that the German passenger car market will see a further moderation in the decline posted in the first two-thirds of the year in the final third, if only from the lower base comparison recorded by a weakening market in the equivalent period last year. However, there are other reasons to believe that the market may gain some fundamental momentum, not least as a result of the positive economic environment in Germany, despite this week's surprise announcement that unemployment crept up in September by 25,000 to just under 3 million, which went against most expectations. The new German coalition government's main concern will be the economic weakness in the Eurozone, with Angela Merkel likely to form a coalition with the Social Democratic Party (SPD). The ramifications of the Eurozone sovereign debt crisis and associated European banking-sector risks – involving recurring financial-market jitters and major fiscal-consolidation efforts across Europe – will continue to prevent any economic boom of the kind observed in 2010/11, but generally rebounding leading indicators since November 2012 suggest that the recovery that has become visible with second-quarter 2013 data will be sustained during the next few quarters. However, the (prior to September's figures) relatively robust developments in job creation and income levels have not seen corresponding increases in the private consumption figures which underpin the car market. This indicates there is still considerable caution among consumers towards making big ticket purchases, possibly as a result of the ongoing difficulties in the Eurozone, although it is possible that Angela Merkel's re-election in September's general election will help a marginal improvement in consumer confidence.

However, despite the flat performance overall in 2013 the German market remains a beacon of stability and consistency as Europe's largest passenger car market. This compares to the somewhat anomalous consistent increases in the UK market for example, which rather go against the wider macroeconomic picture, despite recent signs of a moderate recovery, while the Spanish market has just posted a highly accelerated increase of 29.6% y/y in September (see Spain: 2 October 2013: Spanish passenger demand surges as Italy flattens in September). The Spanish result was influenced by the low base of comparison caused by a value-added tax (VAT) rise from 18% to 21% during the same month a year ago. It has also been helped by the third round of the government's Plan Ecological Industrial Vehicle (Plan Industrial del Vehículo Ecológico: PIVE) scrapping incentive. For the full year, IHS Automotive still foresees the German passenger car market declining by around 3.8% y/y to 2.96 million units. However, this will still be a historic low for the market, especially in the context of the market's recent performance, and well below the average of the previous decade even when excluding the volatility of the scrappage-fuelled boom of 2009.