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French, Italian and Spanish Car Sales Buoyed in November by Low Base Comparison; Outlook for 2010 Not Positive

Published: 12/3/2009
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While November's accelerated growth figures look positive on first analysis, they are indicative of volatile market conditions manipulated by scrappage schemes and low base comparisons.

IHS Global Insight Perspective

 

Significance

Car sales in the French, Spanish and Italian passenger car markets showed accelerated growth in November in comparison to the lower base comparison of the year before and the ongoing effects of scrappage and incentive schemes.

Implications

November last year was when the worst effects of the global credit crunch began to hit European vehicle market, so growth is not unexpected, but the recorded rates of between 31% and 48% on the three markets in question continue to suggest that scrappage scheme and incentive programmes continue to have a marked effect.

Outlook

The sales growth recorded in November was artificially boosted by the low base comparison. Moving into the 2010 the outlook is far less rosy as scrappage schemes and incentive programmes run their course, although many European government are looking to extend them in order to prevent a sudden drop off in sales.

The French, Spanish and Italian passenger car markets all boasted sales increases of 31-48% in November, a result influenced by the extremely low base comparison witnessed in November 2008 as a result of the onset of the credit crunch.

France

The French market posted the biggest monthly growth figure during November, with the market showing a 48.4% year-on-year (y/y) increase in sales during the month with sales of 216,452 units, according to the latest data released by the French industry association, the CCFA. This result benefited partially from their being one extra working day in November. In the year to date the French market increased by 7.6% y/y to post sales of 2.04 million units on the back of the 1,000-euro scrappage incentive programme that has been in place since 14 January. While November posted an exceptional one-off growth figure, the real reason behind such an accelerated growth figure was the low base comparison recorded during the equivalent period in 2008. Commenting on the results, CCFA President Xavier Fels said, "November 2008 was the low point of the cycle," adding that, "The question of the low basis of comparison is very important." Referring to the extremely poor market environment experienced in the last quarter of 2008, as a result of the global economic downturn. However, he also stated that in comparison to 2007's sales, which is a more like-for-like comparison the results were satisfactory and over the last four months the CCFA has been noticing a recovery in the French market.

Italy

November's sales figures for passenger cars in Italy also posted a strong growth level of 31.3% year-on-year (y/y) to 182,976 units, according to the latest data released by Anfia, with consumers looking to take advantage of the government's eco-incentive programme before its slated expiry date at the end of the year. Italy's leading manufacturer had a strong month but failed to match the overall performance of the market as the brand saw sales rise 27.7% y/y to 55,610 units. For the first 11 months Fiat saw its market share decline marginally to 30.4% down from 31.3%. After the strong November results it is also expected that December's sales environment in Italy will be robust, which should boost sales to a similar level witnessed in 2008, during which 2.16 million units were sold. Commenting on November's results Gianni Filipponi, director general of Italy's foreign automakers association UNRAE, said, "New car sales in November... confirm the importance of incentives, which besides improving the quality of vehicles on the road are a support for a market that otherwise would have recorded strongly negative numbers with dramatic consequences for the entire automotive sector." December's sales are expected to be bolstered by the strong rate of advanced orders recorded in the market in November, which were up 44% to 204,000 units.

Spain

New passenger car sales in Spain posted a highly robust increase of 37.3 y/y to 86,639 units in November in comparison to the figure of 63,122 units that the market recorded in November 2009, according to the latest set of data released by the Spanish manufacturers' association ANFAC. However, the Spanish market was one of the worst-hit European markets as a result of the global downturn and this result was heavily influenced by the low base comparison. A truer picture of the market was probably displayed in the YTD sales result, which was down by 20.8% in the first 11 months of the year. In the first 11 months of the year, Renault led the market by way of brand sales volume, selling 82,195 units (-14.6%), followed by Citroën with 79,035 (-18.5%). Local brand and Volkswagen (VW) Group subsidiary SEAT came in third, selling 76,797 vehicles (-20.7%).

Outlook and Implications

While the low base comparison and the ongoing positive effect of the various scrappage scheme and tax incentive schemes in place across the European marketplace have exacerbated sales volume growth in France, Italy and Spain. it remains to be seen what effect the scrappage schemes that have run throughout 2009 in the European market will have on the 2010 market, as they are withdrawn or phased out. The 1,000-euro French scrappage scheme was originally supposed to end on 31 December although it seems it will be partially phased out throughout 2010, in order to prevent a marked drop-off in the market. The Spanish government has suggested that it will extend the hugely successful scheme that has helped the worst-hit of all the European passenger car markets regain equilibrium for the duration of 2010 (see Spain: 26 October 2009: Spanish Government Extends Scrappage Scheme).

Meanwhile, the Italian government is currently discussing the prospect of extending its own scheme into 2010, although this is still to be decided. The Italian finance minister Claudio Scajola is currently examining ways to finance the extension of the scheme to subsidise the purchase of low emission passenger cars into 2010, as the extension was not part of the government's original budget plan. As things stand the current programme, which offers 1,500 euro for car owners scrapping older vehicles, is set to run out on 31 December. While a gradual phase-out or the temporary renewal of scrappage schemes across the various European markets is the right strategy to avoid a sudden drop-off in sales, there is still scope for considerable sales declines moving into 2010. A lot of demand has been fulfilled by the initial release of the scrappage schemes and it remains to be seen if the partial economic recovery that has been witnessed in the second half of 2009, will be sustained into 2010. As a result IHS Global Insight currently forecasts that there will be a drop-off in Western European passenger car sales next year of 8.5% y/y to 11.8 million units as scrappage schemes run their course.

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