Western European New Car Market Edges Up Just 0.2% in 2007

New car demand in Western Europe remained flat in 2007 compared to 2006, managing year-on-year (y/y) growth of just 0.2%, according to figures released by the pan-European carmakers' association, ACEA this morning. This followed a mixed December, when overall Western European growth improved by 0.4% y/y.

A total of 14,794,207 new cars were registered in the EU15 Western European countries plus those of Iceland, Norway and Switzerland in the full-year 2007, compared to 14,765,719 in 2006, which equates to 285,000 extra sales. However, when the 14.5% hike in demand from the ten new European Union (EU) member states were taken into account, y/y growth in the enlarged Europe was 1.1%, ACEA said. That took the region's total new car registrations to just under 16 million.

Soaring oil prices, changes in taxes, shrinking credit availability and purchasing power restrained buyers' confidence and the demand for new cars in some of the Western European countries, ACEA noted. In the new EU member states, where car density is still much lower and many households have been able to afford to buy a new car only recently, a much more dynamic growth was recorded throughout the year.

Western Europe's totals were dragged down by the problematic German market, which had its worst year in 2007 since reunification in 1990, losing 9.2% of sales, equivalent to 320,000 fewer units (see Germany: 7 January 2008: German New Car Market Falls to Lowest Level in 2007 Since Reunification). Spain also witnessed slightly lower demand with its 2007 market falling by 1.2% y/y, whilst the French and Italian markets both managed growth (see Europe: 3January 2008: Introduction of New Emissions-Related Taxes Skews Western European 2007 Sales Totals). The United Kingdom also reported healthy growth in 2007 (see United Kingdom: 8 January 2008: U.K. New Car Market Defies Initial Expectations, Rising 2.5% in 2007).

All Eyes on Fiat

Looking at the manufacturer performances in Western Europe in 2007, there were a few clear winners, whilst the majority of carmakers reported flat growth, having relied on Eastern Europe and Russia for any incremental volumes from this part of the world during the year. The Fiat Group was the biggest winner, having registered 73,500 extra units in Western Europe in 2007 compared to 2006, thanks to its 6.6% y/y growth. The vast majority of those—almost 69,000—came from the main Fiat brand, which launched its new 500 city car to enormous success during the year.

The BMW Group also far outperformed the market, with its 6.3% y/y growth, which came mostly from Mini, although the BMW brand also registered strong growth. 2007 was the first full-year of sales of the new Mini, with volumes also boosted by the arrival of the Mini Clubman estate model.

Skoda, Volvo, Land Rover, Chevrolet, Dacia, Honda, Suzuki, Mitsubishi and Chrysler also reported good y/y gains in Western Europe throughout the year. The main losers were Jaguar, whose full-year 2007 sales plummeted by almost 20% on 2006, Saab which lost almost 7% of its volumes, and the Renault and Nissan brands, which lost 8.4% and 6.5% of their volumes respectively. Europe's favourite brand Volkswagen (VW) also struggled, losing 4.1% of sales over the year, equivalent to almost 67,000 units.

Outlook and Implications

2007 was a year of contrasts for Europe's automotive industry. In terms of markets, German demand sank in the face of consumer uncertainty caused by imminent changes to its new car taxation system whilst Italian sales soared, helped along by the government's incentive scheme. The United Kingdom defied initial expectations remaining far more buoyant than expected whilst the French market surged ahead in the second half of the year, enough to cancel out its worryingly weak beginning. All in all in Western Europe, the gains made by some markets were cancelled out to a large extent by the falls of over half a million units in Germany, still the region's largest market. The biggest contrast of all was that between East and West, however, with the mature state of the Western European market being amplified by the rapid growth of its young and emerging Eastern neighbours.

In terms of manufacturers, again significant contrasts were to be seen. In Western Europe, VW lost 67,000 units and French giant Renault lost over 100,000. The Fiat brand, on the other hand, which seemed to have been in the doldrums for so long, gained almost 70,000 new units. Other volume brands of Ford and Opel/Vauxhall managed no growth at all.

Looking forward, much of the regulatory factors that are skewing volumes in Western Europe in 2007 will continue into 2008. This is especially the case in Germany, where consumer uncertainty will remain worryingly high until the government publicly announces its final and confirmed plans for the country's new car tax regime. Because of the magnitude of Germany's new car market, its fortunes can have a notable effect on overall volumes in the region. Looking at other markets, the introduction of France's eco-tax can be expected to have a positive effect, not least for the French manufacturers whilst in Italy, the renewal of the government's incentive scheme should also keep the market buoyant. In the United Kingdom and Spain on the other hand, economic factors, including concerns about the housing market are expected to take their toll on new car buying trends in 2008.

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