Global Insight Perspective | |
Significance | Three manufacturer groups—Volkswagen, Toyota and Fiat—managed to buck the generally negative trend evident in the Western European passenger car market in July as monthly sales fell by 4.2% y/y to 1,165,763 units. |
Implications | VW's market share rose to 21.3%; Fiat's to 7.9%, while Toyota's robust 14.0% y/y gain resulted in a one full percentage point y/y increase in the Japanese company's monthly market share to 6.2%. All three groups have strengthened their position on the year-to-date chart through the seven months. |
Outlook | Looking at the bigger picture, the declines witnessed in the majority of Western European countries confirm that the regional car market has got off to a lacklustre start to the second half of the year. The YTD total is just 0.6% above 2005's level and with the height of the Italian boom now passed, the Western European car market is left increasingly reliant on the German market's expected end-of-year rally to manage a modest increase in the full year total. |
Western European Car Market Shrinks in July
Three manufacturer groups—Volkswagen, Toyota and Fiat—managed to buck the generally negative trend evident in the Western European passenger car market in July as monthly sales fell by 4.2% year-on-year (y/y) to 1,165,763 units, Global Insight forecasts ahead of the release of official statistics from the pan-European industry association ACEA on 15 September.
The weak start to the second half of the year came as the sustained high level of fuel prices, coupled with exceptionally hot weather patterns present across most of the region, took their toll on consumer activity. In addition, the occurrence of the football World Cup during the month will have limited sales especially in host nation Germany, which is the biggest single determinant of the direction of the 16-nation strong Western European car market.
VW, Fiat and Toyota Buck Negative Trend, Gain Market Share
Still, three major manufacturer groups remained immune to such pressures, with Global Insight forecasting that Germany's Volkswagen (VW) strengthened its pole position while Fiat and Toyota powered on. VW's sales increased by 3.2% y/y to 248,531 units, giving the German group a 21.3% share of the market. Fiat's sales rose by 4.9% y/y to 92,034 units, granting it 7.9% of total sales, while Toyota's robust 14.0% y/y gain resulted in a one full percentage point y/y increase in the Japanese company's market share to 6.2%.
Indeed, the solid double-digit increase moved Toyota another step closer to DaimlerChrysler (DCX) at the seventh best-selling position. Given that DCX itself slipped from the growth path it has been on this year overall as the German-American group's sales fell by 2.4% y/y, Toyota will have emerged in DCX's rear-view mirror as an increasingly tough challenger.
A similar battle is being fought over the fifth position as Fiat's continued gains mean that it has narrowed Renault's lead in the seven month year-to-date total to 105,079 units from 294,713 units in the same period in 2005. Fiat has been riding on the success of its Punto and even managed to buck the generally negative trend in its home country Italy last month, supporting the company's European market share targets.
South Korean challenger Hyundai, meanwhile, was amongst the biggest losers during the month as European brands and Toyota gained. Hyundai's destiny was shared by French manufacturers as Renault's sales slipped by 12.4% y/y and PSA's by 8.3% y/y as both companies are paying the price for their selective sales policies designed to protect their margins.
Western European Car Sales - Global Insight Forecast (*) | ||||||
GROUP | July 2006 | July 2005 | % Point Change | YTD 2006 | YTD 2005 | % Point Change |
VW Group | 248,531 | 240,794 | 3.2 | 1,768,874 | 1,648,679 | 7.3 |
PSA | 157,168 | 171,464 | -8.3 | 1,225,032 | 1,267,880 | -3.4 |
Ford | 115,942 | 130,349 | -11.1 | 978,177 | 1,011,197 | -3.3 |
GM | 115,562 | 123,730 | -6.6 | 944,031 | 964,895 | -2.2 |
Renault | 95,372 | 108,820 | -12.4 | 822,002 | 908,651 | -9.5 |
Fiat group | 92,034 | 87,746 | 4.9 | 716,923 | 613,938 | 16.8 |
DaimlerChrysler | 75,375 | 77,236 | -2.4 | 554,188 | 541,847 | 2.3 |
Toyota | 72,671 | 63,764 | 14.0 | 533,870 | 493,994 | 8.1 |
BMW | 57,485 | 60,560 | -5.1 | 467,419 | 459,921 | 1.6 |
Hyundai | 37,198 | 46,094 | -19.3 | 306,742 | 324,616 | -5.5 |
Top 10 Groups Total | 1,067,338 | 1,110,557 | -3.9 | 8,317,258 | 8,235,618 | 1.0 |
WE Car Sales Total | 1,165,763 | 1,216,804 | -4.2 | 9,121,648 | 9,064,979 | 0.6 |
Source: Global Insight (*) Where official figures have not been released at the time of writing, best estimates have been used, as of 10 August 2006 | ||||||
Outlook and Implications
The same three manufacturer groups have continued to strengthen their position on the year-to-date chart. While the Western European seven-month market total remains just 0.6% above 2005's level at 9,121,648 units, VW has increased its sales by 7.3% y/y, Fiat by 16.8% y/y and Toyota by 8.1% y/y. This means that VW's YTD share of the Western European market has increased from 18.2% in 2005 to 19.4%. Fiat's share has jumped from 6.8% to 7.9% and Toyota's edged up from 5.4% to 5.9%.
Overall, the top 10 manufacturer groups strengthened their dominance last month; collectively, they held 91.6% of the market, up from 91.3% in July 2005 as minority players have been unable to respond to stiffening competition in reflection of the automotive industry's general trend which is pointing towards further alliances and consolidation. Within the top 10, the increased competition has pressured traditionally strong volume manufacturers such as Ford and General Motors as Toyota and Fiat have geared up their presence.
The going will, however, be getting tougher for Fiat 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. Indeed, Fiat's ability to re-establish itself will truly be tested as the Stilo’s successor, the Bravo rolls out to challenge the aging Ford Focus and Opel Astra in early 2007. 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 in seventh position in the European marketplace.
Looking at the bigger picture, the declines witnessed in the majority of Western European countries confirm that the regional car market has got off to a lacklustre start to the second half of the year and little respite is in the cards as automakers' efforts to secure positive results have been made even more difficult by recent interest-rate increases by the European Central Bank and Bank of England. With the height of the Italian boom now passed, the Western European car market is left increasingly reliant on the German market's expected end-of-year rally, supported by rebate initiatives from major domestic manufacturers from this month onwards ahead of the upcoming value-added tax (VAT) hike in January 2007.