Posted 02 August, 2018 at 15:02
Ian Fletcher, Principal Automotive Analyst, IHS Markit
August 2, 2018
Implications: The French, Italian and Spanish passenger car markets have all risen during July, helped by working day factors and possibly pre-registrations and incentives applied before the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).
Outlook: We anticipate that all three markets will see some degree of growth from the passenger car category during 2018.
IHS Markit Perspective
The passenger car category in France has grown by 18.9% year on year (y/y) in July, according to the latest data published by the French Automobile Manufacturers Committee (Comité des Constructeurs Français d'Automobiles: CCFA). Registrations in the month have increased from 147,518 units to 175,396 units. The trade association added that the market had benefited from two additional working days compared to July 2017 – 22 days versus 20 days – and that if this advantage is taken out, the gain would have been around 8.1% y/y. This has helped to lift the market's performance in the year to date (YTD) even further, with registrations now up by 6.3% y/y to 1,363,546 units.
Both domestic OEMs contributed to the strong gains this month. Groupe PSA recorded a 28.2% y/y increase in volumes for the month to 56,191 units. This included 5,239 Opel passenger cars, which were not included last year. If this is taken out, PSA would have posted an increase of 16.2% y/y, as PSA's other three brands recorded gains. Peugeot led the way by registering 30,726 units, an increase of 15.7% y/y, while Citroën rose 13.2% y/y to 17,578 units. DS Automobiles' registrations leapt by 49.6% y/y to 2,648 units, as a new crossover provided a further uplift.
Renault Group also put in a positive performance in July. Its registrations have increased by 16.1% y/y to 37,575 units, as the Renault brand gained 14.8% y/y to 27,672 units, while Dacia's registrations were up by 18.3% y/y to 9,781 units.
As for other OEMs, the situation was largely positive. Volkswagen (VW) Group, increased by 19.7% y/y to 24,296 units, as the VW, SEAT and Skoda brands contributed to this performance. Furthermore, gains were seen by Fiat Chrysler Automobiles (FCA; +56.0% y/y to 10,456 units), Ford (+24.0% y/y to 6,241 units), Nissan (+45.8% y/y to 7,040 units), Toyota (including Lexus; +30.3% y/y to 9,122 units), Hyundai (+29.1% y/y to 3,122 units) and Kia (+21.1% y/y to 3,497 units.
However, premium brands and OEMs have not fared particularly well in France this month. Audi was a modest drag on VW Group’s sales volumes, with its registrations sliding by 2.3% y/y to 5,114 units, and BMW Group declined by 7.5% y/y to 5,660 units as Mini was a drag on performance. Furthermore, Daimler is down by 6.3% y/y to 5,162 units, as both its brands went into retreat. Volvo Cars bucked the general trend as its registrations jumped by 27.1% y/y to 1,453 units.
The Italian passenger car market gained by 4.4% y/y in July to 152,393 units, according to the latest data published by the National Association of Foreign Vehicle Makers' Representatives (Unione Nazionale Rappresentanti Autoveicoli Esteri: UNRAE). This helped relieve some of the downward pressure on the market in the year to date (YTD), although it still ended this seven-month period down by 0.7% y/y to 1,273,730 units.
Fiat was again the top-selling brand in the country, but did not contribute to the overall market growth, falling by 10.1% y/y to 26,537 units. This was not helped by its Panda, Punto, 500 and 500L, although the 500X and Tipo did offset these decliners slightly.
Of the other FCA brands, Jeep fared far better, with its registrations more than doubling to 7,205 units, because of strong demand for the Compass, which sold 3,676 units. Alfa Romeo put in a strong performance as well with its registrations up by 44.5% y/y to 4,910 units on the performance of the MiTo, Giulietta and Stelvio. Lancia had another weak month though, as its registrations contracted by 18.7% y/y to 3,455 units with just a single model in its line-up.
Behind Fiat in the brand chart last month was VW, which registered 12,885 units, a jump of 35.9% y/y, as the Tiguan and new T-Roc both improved substantially. Renault in third place also gained by 38.2% y/y to 11,109 units on the performance of the Clio and Captur. However, Ford in fourth slid by 3.8% y/y to 9,759 units.
The Spanish passenger car market has jumped by 19.3% y/y to 131,176 units, according to the latest data published by the Spanish Association of Passenger Car and Truck Manufacturers (Asociación Española de Fabricantes de Automóviles Turismos y Camiones: ANFAC). This has helped to maintain a strong growth trajectory in YTD, with an increase of 11.4% y/y to 865,845 units.
Leading the market this month has been Renault which registered 12,288 units, increasing by 32.9% y/y, as the Mégane, Clio, Captur and Kadjar all made strong gains. It was followed by the VW brand which registered 11,372 units, growing by 34.9% y/y, supported by a strong month from its crossover offerings, and most notably the introduction of the T-Roc. In third was SEAT which has grown by 17.7% y/y to 9,963 units, driven by the Arona and Ateca. Nevertheless, it remained the leading brand in the YTD.
Outlook and implications
These early indicators suggest that it will be a positive month for the European market. While July typically sees weaker registrations versus some other months in the year, this month it will be boosted by additional working days. Furthermore, OEMs and dealers may also be pre-registering vehicles in order not to be caught out by the change in emissions testing and a shift towards the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) from 1 September.
The French market growth coincides with positive economic growth, although after reaching a six-year high in 2017, some momentum has been lost in the first and second quarters of 2018. According to figures released by the National Institute of Statistics and Economic Studies (Institut national de la statistique et des études économiques: INSEE), GDP grew by just 0.2% quarter on quarter (q/q) during the second quarter, growing by the same magnitude during the first three months of the year. Domestic demand made a modest contribution to growth during the second quarter. Private consumption declined, albeit modestly, for the first time in seven quarters. As expected, consumption of goods waned during the second quarter as two modest increases in May and June could not offset a marked contraction in April. Higher inflation – it reached a six-year high in May and is expected to remain relatively elevated during the second half of the year – is likely to limit private consumption growth during the rest of the year, despite an expected rebound during the third quarter. There are also indications that employment growth may have lost some momentum compared with last year. The timing of some fiscal measures is also likely to be injecting some volatility into the private consumption figures. Fiscal policy should become a bit more supportive during the second half of 2018 as reform of the housing tax and the cut in social contributions take effect. More positively, investment spending, which had decelerated markedly during the first quarter, rebounded during the April–June period. Business investment was particularly strong, although its increase (1.1% q/q) was still slightly below the growth rates recorded during the second half of 2017. At present, IHS Markit anticipates that France's passenger car market will rise by about 2.8% to 2.165 million units in 2018.
In the Italian passenger car market, which has seen some weakness over the past seven months on the withdrawal of incentives for business investment and a change in FCA’s market strategy, most customer categories have risen. Registrations to private customers has grown by 1.5% y/y, while company car registrations are up by 4.6% y/y and registrations of long-term rentals – another method through which businesses undertake vehicle ownership – is up 20.4% y/y. However, registrations made for the short-term rental market has declined by 35.9% y/y, not helped by fleets having been bolstered earlier in the year. The situation in the market place will not have been helped by the recent bout of political upheaval due to elections and financial market stress, which is likely to ratchet up consumer and business caution. Clearly, this represents a tangible risk to households' discretionary spending and firms' investment decisions in the next few quarters. A positive contribution to the first national budget of the League and Five Star movement government should signify a boost to disposable income for struggling households, though, which traditionally have a high propensity to consume. For now, IHS Markit currently expects that passenger car registrations will grow by 1.4% to around 2.0 million in 2018.
The Spanish market's growth rates in July have been driven by demand from companies and rental fleets. Company registrations have grown by 29.5% y/y to 44,046 units, while rental fleets are up by 31.3% y/y to 20,516 units. However, registrations to private customers have been solid at 66,614 units, an increase of 10.5% y/y. The market for both private and business customers is likely to be being helped by the positive economy. The country's national statistical office (INE) recorded the 19th successive quarter of growth in the second quarter of 2018, with real GDP growing by 0.6% quarter on quarter (q/q). The economy continued to brush aside domestic political risks, namely the fallout from lingering tensions in Catalonia and fractured governance from Madrid. The main upside appeared to be healthy employment growth supporting revived consumer confidence. However, the statistical office estimates that private consumption growth slowed in the second quarter. The extent of the slowdown was a surprise, given the backdrop of continued strong employment creation and "continuing favourable financial conditions". However, a notable pick-up in consumer price inflation in May and June damaged household purchasing power. IHS Markit sees passenger car registrations in 2018 growing 7.1% to 1.32 million units.