German passenger car sales post 9% increase in March

The German passenger car market posted a strong rise during March, up by 9.0% y/y to 232,039 units, according to the latest data release from the KBA. This helped the year-to-date (YTD) figures increase by 6.4% y/y to 757,630 units as the market recorded a very positive start to the year. The KBA noted that that the share of the private buyers rose by 4.6% to 35.8% in March 2015 in comparison to the year before. In terms of the fuel split in the market during March 51.4% of the new cars registered were gasoline (petrol) with 46.9% diesel sales. Electric vehicles (EVs) enjoyed a strong month with a 55.3% y/y increase in sales, although the overall figure was still at the modest base level of 1,278 units. The average CO2 emissions of new cars fell to 130.5 g/km, 3.3% lower than a year ago.

The German market's leading passenger car brand Volkswagen (VW) enjoyed a very strong month during March; its sales rose by 14.3% y/y, boosted by ongoing strong sales of the new Passat while the best-selling Golf also continued to contribute strongly. Mercedes-Benz just beat Audi for second place in the market during the March, by 27,674 units to 27,440 units. Mercedes-Benz continues to benefit from strong sales of its compact car range and the new C-Class. Mercedes-Benz regained its customary second position in the March OEM brand sales table after slipping to fourth in February. Although Audi's YTD growth for the first quarter outdid Mercedes-Benz with 6.8% to 3.7%. BMW was fourth with sales of 24,317 units during March, while YTD sales rose by 4.9% y/y to 24,317 units. The only top-10 marque to record a decline was Renault, with sales which fell by 13.5% y/y to 10,037 units against a high base comparison period last year when it was engaging in a particularly deep round of discounting and incentives.

Outlook and implications

The rising number of private buyers entering the market in March shows a market that is in fundamentally positive shape due to improving macroeconomic indicators and the resultant rise in consumer confidence. Rising confidence and rising numbers of private buyers tallies with the trend of some generous pay deals and agreements that have been reached in Germany's industrial sector in recent weeks, not least the car industry, where production line workers have been given a significantly above-inflation pay settlement (see Germany: 6 March 2015: VW workers receive 3.4% pay rise), with inflation coming in at just 0.9% for 2014. According to IHS' economics service, in overall terms the German economy has returned to a recovery path since late 2014 despite restraining influences related to geopolitical crises and uncertainty about Greece's future in the Eurozone. Geopolitical uncertainty linked to crises in Ukraine and the Middle East and ramifications of the Eurozone sovereign debt crisis and associated European banking-sector risks – involving recurring financial-market jitters, recently focused on developments in Greece, and ongoing fiscal-consolidation efforts across Europe – are still restraining German economic growth momentum.

Nevertheless, the economy has overcome a mid-2014 growth pause, surging ahead at an unexpectedly strong pace of 0.7% quarter on quarter (q/q) or 2.8% y/y in the fourth quarter of 2014. Germany's economy is underpinned by the ongoing high degree of international competitiveness and persistently robust consumer demand resulting from supportive real income and labour market developments. IHS' March forecast predicts GDP growth will strengthen from 0.2% in 2013 and 1.6% in 2014 to 2.1% in 2015 and 2.2% in 2016 which will give a solid base for growth going forward. The passenger car market in Germany will also continue to be fuelled by the high level of discounting and incentives and OEMs jockey for position and volume, especially the German OEMs vying for prestige in their home market. There will also be a number of new model launches that will continue to fuel sales as the year wears on. Models like the new Opel Corsa and VW Passat have been recent additions that have the potential to boost sales and later on in the year we should see the new Audi A4 and VW Tiguan being added to the list of popular new models, while the forthcoming revisions to the BMW 3-Series range should boost that perennial favourite's popularity. For the full year 2015, IHS Automotive sees passenger car sales in Germany rising by 3.1% y/y to 2.97 million units which would indicate a slowdown on the current rate of growth in the next three quarters of the year.