Fiat, Toyota, VW Group Increase September Sales in Western Europe, Global Insight Forecasts

Western European car sales fell 2.7% year-on-year (y/y) in September to 1.351 million units, according to Global Insight forecasts. Gains in Germany and Denmark and a flat U.K. market failed to offset the falls in the rest of the European markets in a generally lacklustre month. September brings the third quarter and a downbeat summer for the car market to a close and leaves the year-to-date (YTD) picture up just 0.1% entering into the final quarter of 2006.

Despite this rather unfavourable context, the Fiat Group, Toyota and the Volkswagen (VW) Group managed to increase sales in Western Europe in September whereas Renault, General Motors (GM) and Hyundai suffered the largest sales deficit. In absolute terms, the Fiat Group has reported the strongest unit gains, with an additional 11,500 vehicles sold in Western Europe compared to the same period last year. Aided by the new Grande Punto, Fiat has made good strides in several high-volume European markets in addition to strengthening its position at home. 

Toyota has also demonstrated that it can deliver steady growth in Western Europe and pushed sales up 13.3% year-on-year (y/y) in September at 83,801 units. The VW Group remained market leader with sales advancing 3.2% y/y to 256,208 units. On the other hand, Renault appeared to be the most affected by the September sales slowdown. Given that the French carmaker's sales plummeted again at double-digit rate in September, the sales drop-off cannot entirely be apportioned to a general weakness in the market but is also certainly the result of Renault's selective sales strategy and the carmaker's strong dependence on the key C1 and MPV segments, which have lost considerable volumes since the beginning of the year. Sales at GM Europe were down 10% with the declines mostly the result of sluggish sales at the main Opel/Vauxhall brand. 

VW Group Confirms its Lead 

On a cumulative basis, the VW Group remained the driving force in Western Europe as Global Insight estimates that the German automaker increased sales by 6.2% in the first nine months to 2.211 million units. In absolute terms, the VW Group also reported the strongest gains so far this year with an extra 130,029 units sold compared to the same period last year. The Fiat Group reported the second largest gains (+122,428 units) in the period to September, and achieved total sales of 863,468 units, thus confirming its lead on DaimlerChrysler (DCX), whose YTD sales were up 1.4% at 697,813 units. The U.S.-German carmaker has benefited from a late return to form of its premium Mercedes brand. Toyota maintains its eighth position with steady sales gains in the period under review and is edging closer to achieving its ambitious sales targets in the region. In contrast Renault is by far the biggest loser, as volume sales shrank by 115,042 units in Western Europe in the first nine months. It is followed by fellow French carmaker PSA Peugeot-Citroën, whose YTD sales figures showed a deficit of almost 52,000 units and GM.

Outlook and Implications

European consumers are expected to remain largely cautious in their expenditure heading into the final quarter, with oil-related inflation a worry for the consumption outlook with household energy bills beginning to bite as winter consumption ramps up. We suspect that economic activity across the region will come under increasing pressure in the final months of 2006 and during 2007, as a consequence of a firmer euro, some moderation in global growth, monetary tightening from key Central Banks, and overall tightening in fiscal policy, and persistently high oil prices. The German VAT issue is expected to cause a degree of consumer retrenchment in 2007. The European Central Bank (ECB) announced this week it will hold interest rates at current levels, confirmation that it is keeping a close eye on inflationary concerns.

On the manufacturer side, although volumes are now largely flat with 2005 for the first three quarters of 2006, the market is experiencing increased competition. Traditionally strong volume manufacturers such as PSA Peugeot-Citroën, Renault, Ford and General Motors (GM) are under intense pressure as Toyota and Fiat have geared up their presence and Volkswagen (VW) is making unstoppable strides forward. However, looking forward, Fiat is not expected to be able to continue to increase sales at the same rate as the robust pace of the Italian market is expected to slow in the second half while competition in the important B segment will increase following the release of such tough contestants as GM's new generation Opel Corsa, while many of the sales in this segment have already been caught by the new Renault Clio and Peugeot 207. Indeed, Fiat's ability to re-establish itself will truly be tested as the Stilo’s successor, the Bravo rolls out to challenge the ageing Ford Focus and Opel Astra in early 2007. 

Similarly both the PSA Group and Renault are expected to face tremendous difficulties in boosting their sales in Western Europe in the closing months of the year. So far, the French carmakers have seen their European market share shrink by 0.5 and 1 percentage point respectively. PSA's focus on cutting costs and adjusting production to protect margins is not helping reverse a negative sales trend in Europe and the arrival of the new 207 is making little difference. Likewise, Renault's selective sales policy and lack of new models has painful repercussions on volumes. Both carmakers will hope that their overseas operations can bring more positive results while they re-engineer they model offensive. Meanwhile, Toyota's strong performance across most markets bodes well for the Japanese manufacturer's aspirations in Europe, as it is getting closer to overtaking DaimlerChrysler (DCX) in seventh position in the European marketplace.