Executive Briefings

Automobile Market Sees Good Growth in Europe, Though Mostly in Western Countries

Passenger car demand in the European Union rose for the first time in six years during 2014, according to the latest data published by the European Automobile Manufacturers' Association (ACEA). Registrations during the year grew by 5.7 percent year on year (y/y) to 12.55 million units. December was also the 16th month in succession of gains, with registrations having grown during the month by 4.7 percent y/y to 951,329 units.

Automobile Market Sees Good Growth in Europe, Though Mostly in Western Countries

The improvement during the year was underpinned by the growth in many markets. This included the five key markets Germany, France, Italy, Spain and the United Kingdom. However, these have gains have been to varying degrees. The French market recorded a marginal improvement, not helped by emissions-related tax increases, tough labour market and weak confidence. Greater confidence and continued deal-making in the United Kingdom has lifted the market to its highest annual registration total since 2005. However, the Spanish market has improved by a substantial 18.4 percent y/y thanks to the government-backed Industrial Plan for the Ecological Vehicle scrapping incentive. Nevertheless, this improvement is from an exceptionally low ebb, as is the improvement in Italy. This has also been a factor in the improvement in other smaller markets which were hampered by significant economic difficulties in the past, including Greece, Ireland, Portugal and many in Eastern Europe where there has been a growing requirement to replace some of the aging existing fleet.

The growth in the EU this year brings to a close the longest period of decline for passenger car demand in the region. While Carlos Da Silva, manager for IHS Automotive's European light-vehicle sales forecast, has said that this is a "welcome relief" for the market, the market is one which remains fragile and is "not a fully cured patient." He notes that the growth stemmed from "two main pillars, one virtuous, the other one certainly less so."

On the former, he points to pent-up demand and the fleet renewal needs, stating, "This was at play in all countries but much more evident in those Southern markets that experienced impressive sales collapses in the recent past. These markets had reached such lows that, nearly independent of the economy, they had to rebound. By and large, this is mostly a positive factor: demand is fueled by natural means, customers that do need new cars."

However, on the other side Da Silva says that these gains have also been driven by incentives. While the evidence of price discounts and aggressive sales policies – which have been an integral part of the European landscape for a long time – explain the significant increase in Spain and, for a great part, the continuous growth in the UK, there are also what he refers to as "more disguised practices." This includes registrations made to rental businesses, by dealerships and self-registrations. Da Silva said that while these practices are nothing new, "they have definitely on the been on the rise lately, and they do influence the final result."

Source: IHS Automotive

The improvement during the year was underpinned by the growth in many markets. This included the five key markets Germany, France, Italy, Spain and the United Kingdom. However, these have gains have been to varying degrees. The French market recorded a marginal improvement, not helped by emissions-related tax increases, tough labour market and weak confidence. Greater confidence and continued deal-making in the United Kingdom has lifted the market to its highest annual registration total since 2005. However, the Spanish market has improved by a substantial 18.4 percent y/y thanks to the government-backed Industrial Plan for the Ecological Vehicle scrapping incentive. Nevertheless, this improvement is from an exceptionally low ebb, as is the improvement in Italy. This has also been a factor in the improvement in other smaller markets which were hampered by significant economic difficulties in the past, including Greece, Ireland, Portugal and many in Eastern Europe where there has been a growing requirement to replace some of the aging existing fleet.

The growth in the EU this year brings to a close the longest period of decline for passenger car demand in the region. While Carlos Da Silva, manager for IHS Automotive's European light-vehicle sales forecast, has said that this is a "welcome relief" for the market, the market is one which remains fragile and is "not a fully cured patient." He notes that the growth stemmed from "two main pillars, one virtuous, the other one certainly less so."

On the former, he points to pent-up demand and the fleet renewal needs, stating, "This was at play in all countries but much more evident in those Southern markets that experienced impressive sales collapses in the recent past. These markets had reached such lows that, nearly independent of the economy, they had to rebound. By and large, this is mostly a positive factor: demand is fueled by natural means, customers that do need new cars."

However, on the other side Da Silva says that these gains have also been driven by incentives. While the evidence of price discounts and aggressive sales policies – which have been an integral part of the European landscape for a long time – explain the significant increase in Spain and, for a great part, the continuous growth in the UK, there are also what he refers to as "more disguised practices." This includes registrations made to rental businesses, by dealerships and self-registrations. Da Silva said that while these practices are nothing new, "they have definitely on the been on the rise lately, and they do influence the final result."

Source: IHS Automotive

Automobile Market Sees Good Growth in Europe, Though Mostly in Western Countries