November European Car Sales

Summary
Car sales in Western Europe fell by 2.7% in November, despite the fact that there was the same number of selling days. The selling rate remained respectable at 14.8 mn units.
Italy and Spain enjoyed good results with selling rates remaining strong, even though the Spanish market recorded a year-on-year decline vis-à-vis last year’s very strong November.
The UK market continues to fall back and is threatening to offset gains in other markets as we move into 2006.
German demand was good in comparison with much of 2005 though this market clearly has some way to go before it can be assumed that a durable recovery is under way.

November marked a solid result with a seasonally adjusted annualised selling rate of just over 14.8 mn units/year. The market is limbering up to what seems to be turning into a regular event: a strong incentive-led December that boosts sales for the year. We are assuming that the selling rate will top 16 mn units/year this December resulting in a full-year total a little under 14.7 mn units for 2005, not a bad result given the prevailing weakness in consumer sentiment in a number of large markets. The outlook for 2006 remains solid, though we do not currently expect to see a further gain in sales.

In Germany, the November result came in slightly below expectations. The selling rate eased back from the strong October level, to 3.37 mn units/year in November, but we remain optimistic that the year will end strongly with a robust December figure producing full-year sales of 3.34-3.35 mn units in total. We continue to expect a flat market in 2006 as the VAT change scheduled for early 2007 pulls forward some sales into late 2006. And our medium-term assumption is that a more durable recovery may start to emerge in 2007.

The decline in the UK market was once again evident with sales falling by 8% on the year and the selling rate remaining cool (relative to the last few years) at under 2.3 mn units/year. Consumer confidence continued to slide in the month and this had an especially strong impact on the retail element of sales, sales to businesses were actually up. December should be relatively strong but only if manufacturers boost demand with incentives. Full-year sales for 2005 are now likely to be between 5% and 6% down on 2004 levels. A further decline is expected in 2006.

Italian car sales were strong with a selling rate of over 2.4 mn units/year but, even so, fell slightly short of our expectations, we had been assuming that November would begin the run-in to a very strong year-end. Sales still look likely to register a small decline in 2005 even with a strong December. The outlook for 2006 remains rather flat with a fractional decline in sales projected.

In France the market improved, at least from a seasonally adjusted perspective, on a rather poor October result. We look poised to see a strong December despite the worrying consumer confidence figures as OEMs hope to end the year with a bang. Our expectation that sales will grow by 4% or so in 2005 remains intact. Looking forward to 2006, we see little chance of decline but the outlook is not especially encouraging: we project a small gain in sales of as little as 1%.

The Spanish market bounced back in November as pent-up sales, deliveries were stalled by the road haulage strike in October, came through the system. The selling rate pushed up towards 1.67 mn units/year and December should be equally strong (if not stronger still). The Prever incentive, having been extended until the end of 2006, should not prove to be an excessive stimulus to sales in December of 2005, though OEM pricing incentives, and perhaps further release of pent-up deliveries, will help produce a surge. Next year we expect strong sales but there is some chance of moderation, a small drop is anticipated.

Ireland and Denmark are among the stronger-performing small countries while Greece and the Netherlands continue to act as a drag.