EU passenger car demand grows 6.4% y/y during September – ACEA

Passenger car demand in the EU has had a good month in September according to the latest data released by the European Automobile Manufacturers' Association (ACEA). Registrations during the month have grown by 6.4% year on year (y/y), hitting 1,235,501 units, and this is the 13th consecutive month of growth in the region. The gains this month have further supported the year to date (YTD) figures, which now stand at 9.57 million units, up 6.1% y/y.

The gains this month were backed by the improvements in the key five markets in the region. This included the UK, which was the largest market this month with registrations up 5.6% y/y to 425,861 units as a result of the biannual age-related number plate change. Germany, France and Italy also benefited from single-digit percentage gains this month, the latter despite being at an exceptionally low ebb. However, the Spanish market continues to grow strongly, up 26.2% y/y to 57,010 units thanks to the ongoing positive effect of the Efficient Vehicle Incentive Programme (Plan Industrial del Vehículo Ecológico: PIVE) which is now in its sixth round and has driven demand since the beginning of the year. Outside this five, the majority of markets have recorded gains, with some of the previously weakest economies such as Greece, Ireland, Portugal and a number of Eastern European markets showing double-digit percentage improvements.

On an OEM basis, the largest player, Volkswagen (VW) Group has risen this month in line with the market as a whole at 6.7% y/y with registrations of 290,524 units. The VW brand was at the forefront of these gains, with an improvement of 7.9% y/y, while its SEAT brand recorded a leap of 15.7% y/y as the second-generation Leon and the Ibiza continue to win over customers. However, Audi and Skoda registrations were more muted this month with increases of 3.3% y/y and 3.7% y/y, respectively. Skoda is not being helped by the run out of the Fabia, which will be replaced by the third-generation variant in the coming months. French automakers PSA Peugeot-Citroën and Renault Group both had another strong month as recently launched models help their performance. Renault's Dacia brand made further headway with a registration increase of 20.2% y/y as customers continue to be attracted to its cost-effective product offerings. General Motors (GM) has had a less successful month as the withdrawal of the Chevrolet brand has had a negative impact on its overall sales despite the gains recorded by Opel. Nissan continued to make headway in its quest to increase its market share to 5% in the region this month, helped by a 16.9% y/y improvement, benefiting from the launch of second-generation Qashaqai and Note and third-generation X-Trail. It may also have been helped by its standing in the UK. Premium automakers had a largely positive month, with Daimler, Volvo Car Corp. and Jaguar Land Rover (JLR) all recording improvements. However, the BMW Group's sales slipped by 1.0% y/y despite the Mini brand recording a gain of 4.9% y/y.

Outlook and implications

September's solid performance for the passenger car market in the EU was welcome given the slightly weak summer months, exemplified by the SAAR which is back to more sustainable growth after the expected slowdown mid-year. However, Carlos Da Silva, manager for European light vehicle sales forecast at IHS Automotive said that despite an ongoing message that the region is on a positive path, there are still many reasons to remain cautious. Points he noted included some artificial support for the region such as a positive calendar effect, the number plate change in the UK and the end-of-quarter push implemented by dealers and OEMs. Da Silva also said that in terms of volumes sales levels remain historically low, adding, "Current SAAR is still below the worth point registered in late 2008 [when the financial crisis started], which has been the case for the past two-and-a-half years or so." Current slow sales levels are also being supported by high levels of both direct and indirect incentives, and that even sales of models which have a buzz around them such as Renault's Captur are being bolstered by special editions.

However, Da Silva states, "The main argument in favour of optimism is linked to the renewal cycle: whatever the economy, many markets do need to replace their fleet given the slump in new car demand during past years. This is clearly the reason behind the impressive growth numbers in markets like Portugal, Greece". He adds, "A fleet of cars needs to be roadworthy or it becomes useless – and/or disproportionately costly – and the best way to keep it that way is to have new cars put into the market. That's a leading force behind the recovery of the European market this year but it also explains why the pace is slow: so far said fleet renewal is mostly supported by 'need' not by 'want'. By definition, this also explains why we do not see the market jumping back to pre-crisis levels: the European market structure has definitely changed!"

IHS Automotive currently forecasts that passenger car registrations this year will grow by around 5.2% y/y, although this will be to a little over 12.5 million units, some 3 million units below the peak years of the previous decade. While we expect demand to continue to grow for the coming years thanks to the points Da Silva notes, by the end of the decade it will still only have reached around 14.3 million units, still over 1 million units below where it once was.