Car Sales in Europe Fall 15% Y/Y in September—ACEA

European car registrations fell 15% year-on-year (y/y) in October to 1.13 million units, from 1.32 million in the same month last year according to official data from the Brussels (Belgium)-based pan-European carmakers' association ACEA. The lack of calendar effects between October 2007 and October 2008 means the y/y difference is an accurate comparison and the results reflect the increasing tough market conditions that the European passenger car industry is operating in. In a statement the ACEA said, "Reflecting the financial and economic crisis, new-car registrations have now decreased for six consecutive months, most notably since the summer."

Western Europe continued to lead the declines with a 15.5% fall in car sales to 1 million units in October, in comparison to the figure of 1.19 million units at the equivalent point last year. Of the major top-five European markets, Spain and the United Kingdom led the way with the most alarming declines of 40.0% y/y and 23.0% y/y respectively (see United Kingdom: 6 November 2008: U.K. Car Sales Slump 23% Y/Y in October, Biggest Drop in 17 Years). Both of these economies are suffering from a collapse in property prices and relatively high levels of consumer debt. As a result, consumer confidence has taken a huge hit as potential car buyers worry about job security and defer big-ticket purchases. The market that recorded the biggest single monthly fall in Western Europe during October shares many of the same fundamental problems as the United Kingdom and Spain, as Ireland posted a 54.6% y/y decline. Germany suffered a less dramatic fall, managing to keep its decline in sales in single digits to 8.2% (see Germany: 5 November 2008: German Passenger Car Sales Down by 8% in October), however, this was in comparison to an already low base in 2007 when car sales suffered a poor year as a result of the introduction of the higher 19% VAT tax rate at the beginning of the year. France managed to record a slightly lower decline in growth of 7.4% y/y as sales of smaller, more fuel-efficient models managed to sustain some interest in the market.

The new European Union (EU) member states recorded a dramatically less marked decline in sales (-3.2%) in October with 99,076 new vehicles registered. Some of the region's larger markets managed to maintain growth, such as the Czech Republic (7.0%) and Poland (12.3%). However, Romania suffered a 10.6% decline which is one the factors behind the decision of local carmaker Dacia to idle its plants in November.

Europe Down 5.4% Between January and October

Sales for the end of the ten-month period (January to October) saw new registrations in Europe down 5.4% y/y to 12.5 million passenger cars, from 13.2 million in same period 2007. Again, Western Europe led the falls with a 6.0% decline on the same period last year. Meanwhile, YTD period passenger car registrations in the new EU member states have risen by 2.5% to 966,324 units in the same period, thanks to robust markets in Poland (+9.0%) and the Czech Republic (+10.1%).

Outlook and Implications

The financial turmoil in the last two months that has plagued the stock market and led to the biggest global banking crisis since the Wall Street crash is the backdrop against which the European passenger car market is currently operating in. The financial crisis resulting from the credit crunch has also had the additional effect of disabling the automakers' potential to stimulate the market through incentive finance packages, the common means by which car manufacturers try and boost demand. In fact the carmakers, especially the German ones (see Germany: 12 November 2008: VW, Audi and Opel Request State Aid; EU Industry Commissioner Argues Against Bail-Out) are concerned about their increasing inability to offer any kind of competitive finance or lease packages as a result of the collapse of the credit markets, which has basically seen a collapse in lending between the banks and financial institutions. A number of financial bail-out packages are being rolled out across Europe, such as the one in the United Kingdom, to guarantee bank liquidity and try and regain confidence in the financial sector, but these measures are taking time to trickle down to increase the level of affordable finance to consumers. However, the banks and financial units of the carmakers are unlikely to offer favourable credit terms to those with less than perfect credit histories while the more financially conservative consumers are unlikely to be making big ticket purchases in the current climate. All these factors are combining to see a significant fall in demand across Europe. Even the new member states which were helping to drive growth are beginning to feel the pinch, with Hungary having recently applied to the International Monetary Fund (IMF) for an emergency loan package.