July 2009 West European Car Sales

Summary

Car sales in Western Europe grew by 4.4% in July. This is the second consecutive month with a yearon- year increase, with June having seen the first rise in over a year. 

• Result for Germany: sales up by 29.5% — the year-to-date market was up by 26.6%. The pace of the German market remained strong last month as the scrapping incentive and manufacturer discounts
continued to boost sales. 

• Registrations in France and Italy were also higher than the same month last year, though not to the extent seen in Germany. Despite the tough economic backdrop, incentives are again supporting sales here. 

• The first positive signs also came from the UK, with the market up for the first time (year-on-year) since April 2008. 

• The Spanish market was still very much in negative territory compared with a year ago, and the fact that the selling rate for July was the best so far this year is of little consolation.

Commentary

West European car sales grew 4.4% in July 2009. This follows on from the growth seen in June, which was the first time sales had increased, year-on-year, since May 2008 when the market began to tumble in earnest. While the picture remained mixed when looking at the individual markets for July, the progress of the German market overwhelms all other results. The German market was up nearly 30%, and the seasonally adjusted annualised selling rate, while easing compared to recent months, remained decidedly high at 3.8 mn units/year. Importantly, the scrapping incentive in Germany, combined with the manufacturer incentives, is continuing to distort the market — many cars are enjoying substantial (30% plus) discounts and
some model prices are effectively being halved. 

Elsewhere, incentives are also having a positive effect. In Italy, sales were up 5.6% despite the difficulties faced by the wider economy. In France, the selling rate for last month stood at 2.1 mn units/year, a fairly impressive achievement with the
backdrop of economic recession. 

The UK posted its first year-on-year rise since April 2008, with sales helped by the recently introduced scrapping scheme. The implied selling rate for July edged just over 2 mn units/year, benefiting from a stronger retail market.
In Spain, there was less to cheer about. The Spanish car market nose-dived in the latter half of 2008 and has more recently seen the selling rate languish at levels not previously seen since the mid-1990s. A selling rate of 920,000 units/year for last
month highlights the current weak state of the market, even if it is the highest selling rate so far this year. 

The West European market looks set to fall only a little short of the 2008 result for 2009 as incentives partly offset the general economic gloom. However, there is bound to be payback when these incentives are removed. But which schemes will be
removed and which renewed? France, Italy and Spain have a history of incentive renewals and so a continuation of these schemes is certainly possible. However, it is again the German market that will make the difference and if, as expected, this
scheme is not renewed, a West European market contraction in 2010 of a greater degree than this year would appear
inevitable.