West European sales in 2014 rise for first time since 2007; future growth expected

Economic instability in southern Europe and problems in Russia fuel concerns

2014/12/24

Summary

West Europe Sales Forecast LMC Automotive

 The West European automotive market bottomed out in 2013, and actual unit sales in 2014 are forecast to increase year-on-year (y/y) for the first time in seven years. LMC Automotive predicts that the 2014 light-vehicle market will grow 4.9%, to 13.5 million units; and further grow 4.5% y/y in 2015, to 14.1 million units. Despite this optimistic forecast, economic uncertainties in southern Europe and economic sanctions against Russia have put a damper on this rosy forecast. Some executives in OEMs state that these difficult circumstances are likely to negatively impact that predicted recovery in the West European automotive market in 2015. LMC Automotive predicts that over the mid-to-long term timeframe, the West European light-vehicle market will slightly grow, with sales increasing to 15.2 million units by 2017.

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West European automotive market starts to recover slightly; still weaker than U.S.

West Europe vs US market comparison

 The West European automotive market (which excludes medium-duty and heavy-duty trucks) has shrunk for the past six years, ever since the 2008 global economic crisis occurred. Unit sales in 2013 were 12.5 million, but this was still 3.9 million units less than the 16.4 million units sold in 2007. Even though the West European automotive sales are predicted to grow 5% y/y in 2014, to more than 13 million units, it will still take a long while for unit sales to return to the pre-crisis level.

 On the other hand, in the U.S., where the global crisis originated, unit sales until 2009 had been drastically lower, but have grown steadily ever since 2010. The U.S. automotive market is predicted to grow 5.8% y/y, with annual sales totaling 16.5 million units in 2014, which is definitely greater than the 16.1 million units sold in 2007, the year preceding the crisis.


 



Germany sees slight recovery in automotive market

2014 actual sales estimates and 2015 sales forecast

Germany Sales (2007-2014)

 The majority of automotive demand in West Europe originates in just five countries, namely Germany, the UK, France, Italy, and Spain. Germany reigns as the largest and core automotive market in all of Western Europe. According to International Monetary Fund's World Economic Outlook (WEO) released in October 2014, the German economy is predicted to grow 1.4% in 2014 and 1.5% in 2015, showing signs of slow and steady growth going forward. Unit sales in 2014 are estimated to grow 3% y/y, to 3.3 million units. The Federal Motor Transport Authority of Germany (Kraftfahrt-Bundesamt: KBA) predicted in December 2014 that in 2015 unit sales will grow 1%.

 

Long-term forecast and declining population

 The United Nations Population Fund, in its "State of World Population 2014", predicts that Germany's current population, 82.7 million, will slightly decrease to 82.3 million by 2017 and that between 2010-2015 the population will fall at an annual rate of 0.1%. Germany's total fertility rate, which is 1.4%, is the same as that of Japan. This predicted decrease in population will directly lead to a decrease in the number of vehicles owned and a decrease in unit sales, which means that German car market growth potential will be limited in the future.


Market share and customer base

German Market Share by OEM (2014/1-11)
German Sales by Customer Category (2014/11)

 Five brands which won the high market shares by brand between January-November 2014 in Germany are as follows:
1. Volkswagen: 21.6%;
2. Mercedes Benz: 9.0%;
3. Audi: 8.6%;
4. BMW: 7.8%;
5. Opel: 7.2%.
 One particularly noteworthy point is that luxury-brand vehicles built by Mercedes Benz, Audi, and BMW have retail selling prices more than 30% higher than those built by mass-market OEMs. In spite of this, these luxury brands were still able to capture the second, third, and fourth highest market shares. This is because, when compared to sales in other countries, nearly 70% of their sales as of November 2014 are to corporate clients who account for a huge majority of their customer base. On the other hand, 32.7%, or a little more than 30% of sales, were generated by individual consumers. Most corporate business sales are generated from sales of personal-use company cars, which are leased to individual companies by rent-a-car companies.

 

 Note: Personal-use company cars, which are a common practice in some countries in Europe, are provided to company managers as part of their compensation packages. The types of cars that managers can choose from are commensurate with the managers' titles or positions within their companies. Domestic brands are always given the highest priority, with European brands given the next highest priority, making it difficult for managers to use non-European brand vehicles. In the U.S., where personal-use company cars are not such a common practice, corporate sales account for only 15-20% of total automotive sales. Corporate-use vehicles in the U.S. include government/official-use vehicles, police vehicles, company-vehicles, rent-a-cars, taxis, etc. While "corporate use" doesn't have the same definition everywhere, as seen in the case of the U.S., "private-use company car" sales in Germany are believed to account for nearly 50% of all unit sales. While many companies in Germany and the UK provide company cars to managers for their private use, fewer companies provide them in Italy, Spain and other countries in South France.


 



UK car market enjoys full recovery to pre-crisis level with robust sales in 2014

2014 actual sales estimates and 2015 sales forecast

UK Sales (2007-2014)

 According to the World Economic Outlook (WEO) announced in October 2014, the UK economy is forecast to grow 3.2% in 2014 and 2.7% in 2015, indicating a strong recovery. Automotive sales in 2014 are forecast to grow 10%, to 2.8 million units, while sales in 2015 are forecast to grow only 1.5% according to an announcement made by the Society of Motor Manufacturers & Traders (SMMT), a UK trade association, in November 2014. Even though the overall economy is strong, the low rate of growth forecast for 2015 is based on the fact that automotive sales have fully recovered to the pre-crisis level. This means that there is little room for the market to grow significantly as it had until now. Therefore, experts are predicting slow but steady growth from now on.

 

Long-term forecast: stable growth

 According to the United Nations Population Fund, the UK's population in 2014 is 63.5 million and that the population of the UK will grow at an annual rate of 0.6% between 2010-2015. Since the total fertility rate in the UK is 1.9%, there is little concern about decrease in population. As a result, automotive sales are predicted to grow steadily over the mid-to-long term.


 

Market share: Ford captures number one share

 The top-five market shares by brand between January-November 2014 are as follows:
1. Ford: 13.3%
2. Vauxhall: 10.6%
3. VW: 8.7%
4. Audi: 6.5%
5. BMW: 5.9%
 Even though Ford and Vauxhall are established with US-based capital, they are generally considered to be "domestic UK companies" because of their long-established operations in the country. This enabled them to capture the first and second places in terms of market share. In addition, private-use company cars are widely provided in the UK market, as they are in the German market. Therefore, luxury brands like Audi was ranked in fourth place, BMW in fifth place, and Mercedes Benz in seventh place, accounting for a significantly high share of the market. As a result, corporate clients form the main customer base of OEMs in the UK, as they do in Germany. Corporate clients account for a large percentage of business-use sales and fleet sales, surpassing the volume of units sold to individual consumers. Nevertheless, the increase in unit sales in the UK in both 2013 and 2014 is attributed to increased sales to individual consumers.

Market Share by OEM (2014/1-11) Sales by Customer Category (2014/1-11)

 


 



French economy and automotive market stagnate

 

France Sales (2007-2014) Market Share by OEM (2014/1-11)

 

2014 actual results estimates and 2015 forecast

 In October 2014, the WEO estimates that France's economy will grow 0.4% in 2014. Even with the 1.0% economic growth forecast for 2015, the general economy will be in a state of stagnation and vulnerability. The unemployment rate, which was 10.3% in 2013, is forecast to improve only slightly in 2014 and 2015, to 10%. Automotive sales in 2014 are estimated to grow 1%, to 2.8 million units. The industry association, Comite des Constructeurs Francais d'Automobiles (CCFA), announced in December that it can't find any factors that will lead to an improvement in unit sales in 2015, over those in 2014.

 

Market share: PSA leads, followed by Renault which is catching up.

 The market shares of OEM's in France between January and November 2014 are as follows:
1. PSA: 30.3%
2. Renault: 25.4%
3. VW: 13.1%
4. Ford: 4.2%
5. Toyota: 3.9%.

 

 



Italian car sales continue to significantly stagnate

 

Italian Sales (2007-2014) Market Share by OEM (2014/1-11)

 

2014 actual sales estimates

 According to the WEO in October 2014, economic growth in Italy has been revised downward 0.5%, and that the economy will grow at a negative rate of minus 0.2% for the year. The WEO forecasts that the rate of economic growth in 2015 also will be quite low, around 0.8%, with the economy continuing to stagnate. The unemployment rate is forecast to worsen, from the current 12.2% in 2014, to 12.6% in 2015, indicating that the unemployment rate will still continue to be at a high level in the 12% range. Automotive sales in 2014 are estimated to increase 4%, to 1.45 million units. However, compared to the 2.74 million units sold in 2007, the 2014 unit sales are still very much lower, by over 1.2 million units. Since 2012, the automotive market in Italy has continued to significantly stagnate, with less than 1.5 million units being sold annually in the country. During this time, latent purchase demand, which is needed to trigger new car buying, has been growing. As a result, sales have the potential to greatly recover if the government were to offer support, something that the automotive industry is demanding.

 

Market share: FCA is at the top

 The market shares of OEM's in Italy between January and November 2014 are as follows:
1. FCA: 27.7%
2. VW: 8.1%
3. Ford: 6.8%
4. Renault: 6.0%
5. Opel: 5.6%

 

 



Spanish government's "scrappage incentive program" supporting recovery

2014 actual results estimate

Spanish Sales (2007-2014) According to the WEO's forecast released in October 2014, Spain's economy will grow 1.3% in 2014 and 1.7% in 2015. It shows that the country has been on the road to a gradual economic recovery after 2013, when the economy grew at a negative rate of minus 1.2%. Nevertheless, the unemployment rate still remains at an extremely high level. It is forecast to be 24.6% for all of 2014 and 23.5% in 2015. Automotive sales in 2014 were supported by the government's scrappage incentive program, driving a y/y increase of 18%, to 920,000 units. The scrappage incentive program, which the government extended six times, has had a significant, beneficial effect on the Spanish market. While this is positive, 2014 unit sales (estimated to be 920,000 units) are significantly below the level that they were in 2007 (1.8 million units), by about half as much.


 

Market share

 The market shares of OEM's in Spain between January and November 2014 are as follows:
1. VW: 9.1%
2. Opel : 7.94%
3. SEAT: 7.89%
4. Renault: 7.6%
5. Peugeot: 7.3%
 In Spain, individual consumers account for 55.6% of the automotive sales market, surpassing the 44.4% accounted for by business/fleet consumers.

Market Share by OEM (2014/1-11) Spanish Sales by Customer Category (2014/11)

 



European market (EU + EFTA) share by OEM: VW's overwhelming lead

The European Market Share by OEM (2014/1-11)


 The European Automobile Manufacturers' Association (ACEA) announced the market shares by OEM for the period between January and November 2014. The VW Group had an overwhelming lead, at 25.5%; the PSA Group had 10.7%; the Renault Group had 9.4%; Ford had 7.3%; and GM had 7.1%. The VW Group since 2012 has continued to widen its lead over the other OEMs, achieving a 24.8% market share in 2012, a 25.1% share in 2013, and a 25.5% share so far between January and November 2014.

 

Changes in the European Market Share by OEM


 The following are the most noticeable changes in market shares among the OEMs for the January-November period. The Renault Group had the single, largest increase, which was 0.6 % points. By brand, Renault increased 0.2 % points and Dacia increased 0.5 % points, thanks to the growing market share of the B segment SUV Renault Capur and the Dacia Logan, which are low-priced strategic vehicles.

 The VW Group saw the second highest increase in market share, by 0.4 % points. By brand, VW's share fell 0.1% point, Audi's fell 0.05 % point, SKODA's rose 0.4 % points, and SEAT's rose 0.2 % points. While market-share growth for the Group overall was strong, that for VW itself, the Group's core brand, was lackluster.

 GM lost the most in terms of market share, falling 0.8 % points, as a result of terminating the Chevrolet dealers, avoiding redundancy in terms of the vehicle line-up with the Opel/Vauxhall brand. GM is reorganizing its sales structure and will stop selling Chevrolet-brand vehicles in 2015. The market share of Chevrolet-brand vehicles fell 0.9 % points, a sales decrease of 100,000 units. Unfortunately, unit sales of Opel/Vauxhall-brand vehicles couldn't make up for the decrease in unit sales of Chevrolet vehicles.

 

 



Sales Forecast by LMC Automotive: West European market to expand to 15.2 million in 2017

(LMC Automotive, Quarter 3, 2014)

West Europe Sales Forecast LMC Automotive foresees West Europe's light vehicle sales in 2014 will end up with 13.5 million units, up 4.9 percent from a year ago. In 2013, the region's demand declined by 4 million units from 2007 to 12.9 million. After 6 years decline, sales finally started to pick up in 2014. The major contributors have been the U.K. and Spanish markets. The U.K. is a front runner of five major markets in the region, backed by solidly recovering economy. While the Spanish market has been helped by the government's scrappage incentive. Italy and France have been showing little improvement and have been slow to recover from the recession.

 LMC Automotive foresees West Europe's light vehicle sales in 2015 onward will continue to improve in line with economic recovery, although the pace of recovery is gradually slowing from 4 percent to high 3 percent annual increase. Given the very low base of the market, this is a weak recovery, for instance in comparison with the now fully recovered U.S. market.


West Europe light vehicle sales forecast

(units)
Country 2011 2012 2013 2014 2015 2016 2017
Austria 390,338 369,418 351,704 346,391 359,490 361,005 360,372
Belgium 634,430 541,952 540,068 534,640 550,551 566,059 570,951
Denmark 194,871 195,490 206,561 212,524 195,051 192,486 195,367
Finland 141,417 123,396 114,427 114,582 123,107 133,634 143,902
France 2,633,803 2,282,765 2,157,823 2,179,658 2,245,662 2,319,683 2,413,835
Germany 3,403,445 3,298,332 3,162,494 3,271,556 3,341,265 3,390,645 3,413,053
Greece 103,974 62,000 62,069 75,465 89,262 100,530 126,153
Ireland 101,217 90,329 85,375 113,607 127,632 140,843 152,341
Italy 1,919,595 1,518,982 1,398,310 1,474,807 1,653,116 1,837,907 2,016,249
Luxembourg 53,109 52,530 53,134 48,118 51,729 52,726 53,569
Netherlands 615,057 559,225 468,017 414,605 477,761 527,770 580,686
Norway 176,815 173,252 174,824 176,381 191,641 200,550 202,828
Portugal 188,477 111,360 124,148 169,338 191,164 209,045 221,579
Spain 912,242 769,303 808,009 960,437 1,066,707 1,157,865 1,257,951
Sweden 351,736 319,252 306,679 346,190 346,422 349,431 352,351
Switzerland 347,054 359,606 340,135 324,206 332,104 333,148 336,359
UK 2,207,000 2,291,448 2,542,673 2,759,798 2,785,771 2,802,974 2,819,283
Total 14,374,580 13,118,640 12,896,450 13,522,303 14,128,435 14,676,301 15,216,829
Source: LMC Automotive "Global Automotive Sales Forecast" (Q3 2014)
(Note) 1. Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons.
2. All rights reserved. Reproduction of any data will require permission of LMC Automotive.
3. For more detailed information or inquiries of forecast data, please contact LMC Automotive.

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