EU CV registrations rise nearly 5 percent year-over-year in February 2019

[Excerpt from an AutoIntelligence Daily article]

The commercial vehicle (CV) market in the European Union (EU) has risen again during February. According to the latest data published by the European Automobile Manufacturers' Association (ACEA), the number of light commercial vehicles (LCVs) under 3.5 tonnes, medium and heavy commercial vehicles (MHCVs) and medium and heavy buses and coaches over 3.5 tonnes registered increased by 4.7% year on year (y/y) to 181,636 units. After the first two months of 2019, the year to date (YTD) results for such vehicles now stand at 382,114 units, an increase of 5.7% y/y.

The European Free Trade Agreement (EFTA) region - which comprises Iceland, Norway and Switzerland - was also buoyant during February. Registrations increased by 4.9% y/y to 6,284 units. This has contributed to the positive performance in the YTD, with an increase that now stands at 2.4% y/y taking total volumes for this period to 12,597 units. The LCV category, which made up over 80% of CV demand in the EU this month, provided considerable support for the growth in the CV category this month as it gained by 4.4% y/y to 150,040 units. Of the five largest markets in the region, four contributed to this gain. France led the way with 38,005 registered, an improvement of 6.4% y/y. Even greater gains were recorded in Germany which increased 12% y/y, while Italy was up by 6.1% y/y. The UK rose 1.8% y/y, but its volumes were particularly weak due to customers waiting for the age-related number plate change that takes place in March. Spain was the only faller among the largest markets, as its registration volumes slipped by 3.0% y/y.

Outside this group, performances have been mixed. One of the weakest markets was Sweden, which has recorded a decline of 16.5% y/y; this may still be down to the introduction of a new bonus-malus CO2-based taxation system for new registrations on 1 July 2018, which led to a huge pull-forward in registrations. This has had a considerable impact for this type of vehicle as virtually none of them are eligible for the ultra-low emission incentives. It may also be down to a string of strong annual gains boosting the market. Alongside it in decline has been the Netherlands, Portugal and Ireland. These were partly offset by modest gains in Austria, Belgium, Denmark and Poland, while Hungarian registrations were also up by over one-fifth, Slovenian up by one-half and Lithuanian registrations almost doubling, albeit on exceptionally low volumes in comparison to other markets.

Overall, LCV registrations in the YTD have now grown to 5.3% y/y to 313,285 units.

Growth in the EU MHCV category during February now stands at 6.5% y/y for vehicles with a GVW over 3.5 tonnes, with total registrations of 28,886 units, while those HCVs with a GVW over 16 tonnes gained 15.2% y/y to 23,671 units. The leading market in the MHCV category, Germany, put in an exceptionally strong performance as it increased by 25.9% y/y this month to 7,723 units. It was also boosted by increases in France (+10.1% y/y) and Poland (+6.8% y/y). However, the UK is estimated to have dipped by 0.3% y/y in what is a weak volume month, while Italy was down 12.1% y/y, Spain retreated by 10.6% y/y and the Netherlands contracted by 13.4% y/y.

As a result of this month's performance, registration growth remains solid during the YTD, with the MHCV category gaining by 7.4% y/y to 62,632 units. In the HCV category, registrations have increased by 7.0% y/y to 51,950 units.

Outlook and implications

It has been a positive start to the year for both the LCV and MHCV categories in the EU, despite some of the challenges and uncertainties facing the region. Eurozone GDP growth slowed markedly, with results for the fourth quarter of 2018 confirming that the full year stood at a 1.1% y/y gain, the lowest rate in five years and well below the cycle peal of 2.7% y/y just five quarters before. It was hit by a 0.2% q/q gain in the final quarter of 2018 when private consumption remained weak and inventories were a drag. On a local level, Italy fell into recession and Germany was flat, although these performances were offset by France and Spain. However, while recession is a risk on the back of tariffs and the still undecided Brexit outcome, various growth supports are evident. For now, IHS Markit currently forecasts real GDP growth to slow from 1.8% y/y in 2018 to 1.2% y/y in 2019 and 1.0% y/y in 2020 before edging up to 1.2% in 2021.

Despite the positive performance in the MHCV category during the first two months of the year, Ewa Root, manager of IHS Markit's Global Truck Sales Service, has said that some of the growth behind this increase has been caused by 2018 orders being registered now. However, she adds that we do not expect the positive trend to continue as fundamental factors for the region point to a deterioration in many sectors of economy. Construction activity will continue support sales of heavy rigid trucks, however weaker private consumption and softer export activities will have a negative impact on demand for heavy tractor trucks. As a result, we project that majority of the markets in Europe will experience a slowdown this year.

In the LCV category, those vehicles with a GVW of up to 6.0 tonnes are expected to drop slightly in the EU during 2019, slipping by 3.4% y/y to just under 2 million units. These declines are expected to continue in to 2020, with a modest recovery to follow.

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.