SEPTEMBER WEST EUROPEAN CAR SALES

Summary

• Car sales in Western Europe fell by 2.5% in September.
• Year to date, the market was up by 0.2%.
• Initial estimate for Germany: sales up by 3.7% – the year-to-date market was up by 1%.
• The German market exhibited stability in September, improving on a rather bad result in the same month of last year. The coming months should see a VAT-inspired surge, but there will be a price to pay in January.
• UK sales were a little above expectations in this important month, hitting a seasonally adjusted annualised selling rate of 2.36 mn units/year.
• The French market was a major disappointment with sales falling by a worrying 13% in September (year on year). Seasonal patterns do not explain the difference. Spanish and Italian markets also lacked vigour but were much closer to expectations.
• The outlook for the West European market next year remains stable but uninspiring. The VAT change in Germany is likely to have a negative impact only in the first months of the year.

Commentary

September was not a great month for the West European car market. Sales fell by 2.5%, year on year, and the selling rate eased back notably compared with the earlier months of 2006. Much of the decline emanated from France — in fact, the ex-France West European decline will be closer to 1% and so it is clear that, while there have been more losers than winners in the last month, the problem of poor sales has not become a continent-wide concern.

With consumer fundamentals staying on an improving curve, it would be an over reaction to take this somewhat negative result as a strong blow to next year’s market and we therefore retain a forecast a little under 14.7 mn units for 2007.

The decline in France was of particular concern. It cannot be explained by seasonal patterns and nor has there been a corresponding decline in consumer confidence, raising the possibility that there may be a specific downturn in the buyer’s appetite for new cars. News sources have cited comparison with a strong September 2005 as being to blame for the apparent anomaly but this is not really the case: September 05 was not especially strong. We think there is some likelihood that a weakening in underlying demand may be to blame and, while being careful not to over react to one month’s data, have reduced slightly our expectations for the remainder of the year in France, and next year.

In contrast to the situation in France, Spanish sales, while down year on year, were not hugely weaker than earlier in this year (on a seasonally adjusted basis). Furthermore, September 2005 was strong in Spain. It remains our expectation that Spanish sales will ease this year and next.
The relatively firm result in the UK in September helped balance the results in Spain and Italy: but the UK market remains cooler than last year – we still expect a full-year 2006 decline of around 4% – with a further easing in sales likely next year.