Italian, Spanish Passenger Car Markets Record Double-Digit Percentage Declines in June
The Italian and Spanish passenger car markets have both recorded double-digit percentage declines in June as each market contends with their respective economic woes.
IHS Global Insight Perspective
The Italian passenger car market fell by 24.4% year-on-year (y/y) during June, whilst the Spanish passenger car market has slid back by 12.1% y/y.
The recent indications suggest there is likely to be little in the way of improvement in either of these markets in the short term with both in the firing line from contagion from a potential Greek exit from the Eurozone
IHS Automotive anticipates another year of declines for both countries.
The Italian passenger car market has seen no let-up in its heavy declines as the consumers and legislators cope with the horrendous economic problems facing the country. According to the latest data published by trade association ANFIA, sales during the month fell by 24.4% year-on-year (y/y), from 169,870 units to 128,388 units. This has added to the declines seen already so far this year, and has resulted in first-half sales of 814,179 units, some 19.7% y/y down on the same period a year ago. The key automaker in the country is Fiat Group Automobiles (FGA), which comprises the Fiat, Alfa Romeo, Lancia, and Jeep brands, and because of its importance, its declines reflected that of the market as a whole. In June, sales fell by 23.4% y/y to 39,387 units, although its market share managed to stay almost firm y/y, standing at 30.7%. Other automakers suffered similar if not worse difficulties though, with Volkswagen (VW) ending the month as the second largest brand, but falling 28.1% y/y to 9,248 units. Ford, which typically has second place spot in the market, has been pushed down to fourth because of its 50.2% y/y fall to 6,893 units, while Opel nudged past it with 7,077 units, despite a decline of 43.7% y/y. Renault also ended the month snapping at Ford's heels with sales of 6,883 units, with a decline slightly lower than the market rate at 17.3% y/y.
Spanish passenger cars witnessed another retreat in June as it too was blighted by its markets economic troubles which are keeping customers away from dealers across the country. According to data published by trade association ANFAC, demand fell by 12.1% y/y to 73,258 units, which has not helped its contracting year-to-date (YTD) figure that now stands at 406,070 units, a decline of 8.2% y/y. During the month, the Volkswagen (VW) brand retained its position at the top of the market selling 6,727 units, as demand for its vehicles fell by 8.8% y/y. It was closely followed by SEAT which sold 6,483 units, but fared far better on a percentage basis as the Spanish brand tumbled by 17.4% y/y. VW also maintained its significant lead over the rest of the pack in the YTD having sold 37,935 units, a y/y fall of 4.5%.
Outlook and Implications
Demand in the Italian market during the first half of the year has fluctuated, partly due to strike action in the first quarter orchestrated by vehicle transporters in the country. However, the overwhelming trend has been one of decline as the economic situation in the country continues to heavily influence demand. One of the major problems is a dormant household economy, with nervous consumers continuing to refrain from non-essential spending, and the near-term outlook for household spending is poor at best, with consumers struggling to cope with uneven real income developments, deeper fiscal austerity, and an unpopular structural reform drive making for dismal levels of confidence. Poor economic data and reinvigorated contagion from the Eurozone debt crisis point to a painful and prolonged recession in Italy. Furthermore, despite IHS Global Insight assuming that the EU and European Central Bank will undertake a strong policy response in the event of a Greek euro exit, we expect some contagion to fall on Italy that could prompt a period of deep uncertainty around the exit event, resulting in a considerable hit on business and consumer sentiment. At the moment, IHS Automotive expects the Italian passenger car market to slip to 1.53 million units in 2012, another 14.4% y/y decline and taking it well below the 2.3-million average registered between 2003 and 2007. However, others anticipate that the market will be even worse than this, with Fiat's chief executive officer (CEO) forecasting that it sales will fall to just 1.4 million units (see Italy: 2 July 2012: Fiat Appeals Against Pomigliano Court Order; CEO Expects Double-Digit Italian Demand Fall in July).
Although the situation in Spain had initially appeared more stable, the latest contractions indicate that the country is still heavily affected by its soft economic foundations. Indeed, it is the fourth country in the EU to request assistance after 10-year bond yields have risen aggressively and Fitch downgraded its long-term sovereign debt. This has led many to anticipate that a full sovereign bailout is increasingly likely to take place and the economy will also be in the firing line from some contagion from a Greek exit from the euro, despite the efforts of the EU and European Central Bank. This could prompt a period of deep uncertainty around the exit event, resulting in a further spike in domestic bond yields, some financial market disruption and a considerable hit on business and consumer sentiment. Given these expectations, IHS Automotive anticipates that Spanish passenger car sales will retreat even without the influence of a high base of comparison to contend with. We now expect that the market will reach just 785,000 units this year, down by around half from pre-crisis levels, with an extremely slow recovery set to follow.
- Indian government releases DPCO 2013, expanding price controls to 652 drugs
- Budget 2014: US administration signals greater willingness to compromise
- Mercedes-Benz unveils important new S-Class
- Key US data releases and events
- Global Economic Impact of the Japanese Earthquake, Tsunami, and Nuclear Disaster
- Slow start to 2013 highlights ongoing economic challenges in Vietnam
- GDP, inflation, retail sales, public finances, and Bank of England minutes all feature in UK Economic Week starting 20 May
- Key US data releases and events
- Chinese vehicle sales and production rise to over 2 mil. units in March, Q1 sales up 13.2% y/y – CAAM
- Consumer spending and export recovery drive Japan's GDP growth in Q1