Toyota and Hyundai Suffer in Western European Car Sales Slump

Global Insight's latest forecasts show that Western European new car demand slumped by 8.4% in June to 1,316,232 units,compared with the previous year's 1,437,222 units. This takes year-to-date Western European passenger car registrations to 7,724,802 units which is 2.8% below January–June 2007's 7,944,603 units.

Of the top ten groups in Europe, Japanese giant Toyota is suffering the most, losing more than one fifth of Toyota-brand and Lexus registrations in June compared to the previous year, equivalent to a loss of 18,000 units. Toyota is also the hardest hit in the first half of the year, with its group registrations down by 12.2% on 2007, equivalent to the loss of 60,000 units.

Another brand feeling the pinch more than most is South Korea's Hyundai, whose monthly sales plunged by 10.2% and whose YTD sales are now 6.1% lower than the first six months of 2007, equivalent to the loss of almost 16,000 units.

Just one of the top ten car groups managed to buck June's trend of falling demand. This was the Renault Group whose monthly sales were exactly flat with June 2007, at almost 104,000 units. Renault's YTD sales are also largely flat compared to the corresponding period in 2007. Only two groups have managed any kind of growth in the first half of 2008, which are Germany's BMW and Daimler.

Outlook and Implications

The seasonally adjusted annualised run rate (SAAR) for the Western European region in June is estimated at just 14.3 million cars, some 500,000 units lower than the 14.8-million-unit SAAR for 2008 as a whole. Many of the market's troubles during the month can be attributed to plummeting consumer confidence in Europe and thus fast-disappearing retail demand. Indeed, June has traditionally been an important month for the region's new car market—over the last five years tactical discounting and incentives from carmakers have boosted sales during the month. However, this year similar actions have failed to attract consumers in the same way, further indicating that the economic headwinds in the region are worsening and that private demand in particular is declining.

This means that those groups that rely more on private sales and less on fleet and company car sales—which is generally regarded as a positive due to the low profit margins on such sales—are being hit harder than groups which sell a lot of company cars. It is no coincidence that Toyota and Hyundai were amongst the worst-performing groups in June as both have a far bigger reliance on retail customers than many of Europe's other top carmaking groups.

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