ACEA: EU passenger car registrations recovery gains ground in Q1 2015

Passenger car registrations in the EU reached 3,527,704 in the first quarter of 2015, up 8.6% year-on-year, according to the ACEA

The vast majority of EU member states posted growth in new car sales, with only six countries recording a decline.

Anil Valsan, global automotive analyst at EY, believed that the boost in registrations was primarily driven by a general economic recovery and lower unemployment in many countries, which improved consumer and business confidence. He also cited lower oil prices and new motor finance products as reasons behind the growth.

He added: “The low cost of borrowing and the fall in oil prices have benefited the market. In addition, PCP and new motor finance solutions are helping customers buy and replace vehicles. PCP schemes, especially in the UK, have played a critical role for the pace of growth in the market.”

All major markets saw an increase in registrations in the first quarter of the year, contributing to the overall upturn of the EU market. Registrations in Spain and Italy posted double digit growth compared to the first quarter of 2014, up 32.2% and 13.5% respectively, while new car sales also increased in France (6.9%), the UK (6.8%) and Germany (6.4%).

The rapid increase in car sales in Spain is eye-catching considering that unemployment stands at over 20%. Valsan explained that these growth figures were high because of a government scrappage incentive as well as the low base that Spain reached after years of severe decline.

He said: “One of the main contributing factors to the recovery of Spain’s new car market is the scrappage incentive that the government has in place. It is an artificial drive, pushing customers to replace old vehicles with new ones. Despite the significant rise, registrations are below pre-crisis levels. Markets like Spain, Portugal and Italy have shrunk so significantly that they are starting off from a very low base, which is one of the reasons why we are seeing very high growth rates.”

Among the rest of the EU countries, the highest growth was recorded in Portugal where registrations increased by 36.1%. On the other hand, the biggest fall was seen in Austria (7.5%) and Finland (3.8%).

EY predicts the rate of increase in European car sales will slow down by the end of the year. The accountancy firm expects car registrations to witness a “moderate growth” of 3-4% in 2015, in relation to the previous year.

Valsan commented on the prediction: “We have to take into account some of the seasonal adjustments that will take place as well as some political factors. For example, the political uncertainty in Eastern Europe and Russia; Greece is an area of concern as well. In addition, sales growth is slightly artificially inflated because of the use of incentives. If we were to take out the effect of all these, I think that 3-4% is what we believe is reasonably achievable by the industry.”

In a press release EY characterised the European car market as “fragile”. Valsan said that there are factors beyond political uncertainty that affect the strength of the market. The slow recovery of some major markets, like France and Italy, and an old capacity problem which has not been addressed, have also been weakening the market.

EY is pessimistic about the European Union market’s ability to the reach pre-crisis number of new car registrations in the next five years. It wrote: “We remain cautious about the ability of new car sales to return to their pre-crisis levels by the end of the decade.”

Valsan explained that Europe is unlikely to have a V-shaped recovery like the one experienced in the US because of the high number of countries with different economic performances. He added that in order to hit pre-crisis volumes by the end of the decade, most countries – especially major markets- must have 2-4% growth rates.

Manufacturer performance

Volkswagen remained the most popular brand in the EU, as 421,486 cars of the brand were sold in the first quarter of 2015, 10.7% more than the same period in the previous year.

Ford retained the second position, with 263,477 units sold over the same period, marking a 7.3% year-on-year increase.

Renault followed, with sales of 239,403 vehicles after a 12.2% boost in year-on-year sales. At the same time Opel/Vauxhall dropped from being the third best-selling brand in Q1 2014 to fourth position this year.  

The brand experienced a smaller growth than Renault of 7.7% – selling 238,754 units, 649 units less than its competitor in the first quarter of the year.

The brands which witnessed the highest rates of growth in car sales were Jeep (206%), Mitsubishi (77.5%) and Porsche (47.2%).

Just three companies saw a drop in sales, Jaguar (14.9%), Honda (2.5%) and Suzuki (1.5%).

The VW group – which includes Volkswagen, Audi, Skoda, Seat and Porsche – was the manufacturer group that sold the most cars in Q1 2015. 856,720 of the group’s cars were sold across the continent in the first three months of the year, posting a 9.3% year-on-year increase.

The rise of SUVs

In the Geneva International Motor Show earlier this year there was a number of models launched by manufacturers in different SUV segments.

Valsan said that there has been a recent shift in the car market towards SUVs, due to the increased popularity of segments like compact SUVs.

He believed that manufacturers may benefit in the short-term but fears that the market may become too saturated.

“The increased popularity of SUVs may benefit automakers in the short term, as they take advantage of growing demand for certain segments. The concern now is whether it will become a very crowded market place, where manufacturers will be fighting for profitability,” he said.

As to the reasons behind consumers demand for these type of vehicles, Valsan said: “It is primarily because of the greater comfort that some of these vehicles offer. Consumers feel more safe inside these vehicles because of their size and features. We also have to bear in mind that these vehicles are improvements of previous generations, as manufacturers improved their fuel efficiency, so that is certainly favourable for customers.”