European new-car markets subtly recover from Ukraine war in May

06 June 2022

Key European new-car markets are slowly recovering from the detrimental impact of the war in Ukraine, explains Autovista24 senior data journalist Neil King.

Supply shortages, exacerbated by the war in Ukraine, continue to present a challenge in the automotive industry. However, the latest new-car registration figures from France, Italy, and Spain show that the situation may be slowly improving.

The three key European markets all experienced double-digit year-on-year in May, although they were less pronounced than in April. Additional working days supported the May results but even on an adjusted basis, the French and Italian markets improved.

Spain fared worse when adjusted for two extra working days last month, but this follows a strong correction in April as vehicle deliveries caught up from the severe impact of the truck drivers’ strike in March.

France and Italy’s outlooks maintained; Spain trimmed

Assuming there are no further significant production stoppages, the pace of supply improvements throughout 2022 is the same as reflected in the Autovista24 May forecast. The outlook for the French and Italian new-car markets is unchanged for the year, but the forecast for Spain has been trimmed because of the rising inflationary impact on demand. Nevertheless, the displacement of registrations into 2023 means double-digit growth of over 20% is expected in all three countries next year.

Significant downside risks to this challenging forecast remain, depending on the duration and severity of the conflict in Ukraine and whether it extends further west and beyond the country’s borders. Unlike previous crises, such as the global financial crash of 2008-2009, the new-car registrations outlook for western European markets hinges more on new-car supply than any economic impact on sales. Furthermore, reduced – or even fully disconnected – gas supplies from Russia to continental Europe still pose a major economic threat.

Marginal improvement in France

There were two more working days in France last month than a year ago and Autovista24 calculates that the adjusted year-on-year contraction, of 18.7%, is marginally better than the loss in April. Similarly, the seasonally-adjusted annualised rate (SAAR) rose from 1.32 million units to 1.34 million in May. According to data released by the CCFA, the French carmakers’ association, 126,813 new cars were registered in the country last month.

The French new-car market has been heavily affected by regulations that came into effect at the start of the year. The malus (penalty) for registering new cars extended to those with CO₂ emissions of 128g/km or more. A weight-based tax was also introduced, which applies to all new cars that weigh over 1.8 tonnes. The war in Ukraine derailed the market correction that began in February, but the cumulative decline in the first five months has improved to 16.9%.

Incentives for electric vehicles will be reduced by €1,000 from 1 July 2022, with some consumers rushing to take advantage of the higher subsidy by ordering new cars before the end of June. However, supply will ultimately dictate the French new-car market’s fortunes. Autovista24 has maintained its forecast of a 3.4% decline in 2022, to 1.6 million units. As many new cars ordered in 2022 will not be registered until 2023, the French market is forecast to expand by 23.3%, nudging two million units. Nevertheless, this remains about 11% lower than the 2.2 million new cars registered in 2019, prior to the COVID-19 pandemic.

Italy reintroduces incentives

For Italy, Autovista24 estimates that the market fell by 19% when adjusted for the additional working day compared to May 2021. Nevertheless, this was still a significant improvement on the adjusted 25.9% decline in April. Italian industry association ANFIA reported that 121,299 new cars were registered in Italy last month, but the year-to-date contraction reduced to 24.3% in the first five months of 2022.

Aside from supply challenges and inflationary pressure in Italy, new-car registrations have been restrained as consumers awaited the reintroduction of the purchase incentives announced in April. As these were reinstated on 25 May, the recovery of demand, especially for electric vehicles, is already materialising as Autovista24 had factored into its forecast.

‘The recent entry into force of the purchase incentives for zero- and low-emission cars has certainly played an important role,’ commented Paolo Scudieri, president of ANFIA.

However, Scudieri also cautioned that ‘the greatest number of requests was concentrated in the 61-135g/km CO₂ range, for which the available resources are already running out, with a residue less than 25% of the total allocated to this category.

‘We reiterate that, to adequately support the spread of electrified cars, thus accelerating the process of decarbonisation of mobility, the need remains to include the rental sector in the measure,’ Scudieri added.

As the May tally of new-car registrations was exactly in line with Autovista24’s expectations, with the reintroduction of incentives already reflected, the forecast for 2022 has not changed. A year-on-year decline of 3.4% is expected and registration volumes are forecast to rebound by 23% in 2023, to 1.73 million units, but this would still be 10% lower than in 2019.

One-off or first sign of recovery in Spain?

As in France, there were two more workings day last month than in May 2021 and Autovista24 calculates that the adjusted year-on-year downturn was 19%. This is far greater than the adjusted 7.4% decline in April, which was buoyed by a correction following the national truck drivers’ strike in March - as opposed to signifying a fundamental improvement in the Spanish new-car market. A total of 84,977 new cars were registered in Spain during May, according to ANFAC, the Spanish vehicle manufacturers’ association.

‘Although the market is shrinking, caused by the sharp fall in the rental sector, sales to both individuals and companies closed the month on a positive note. This improvement may reflect a growing interest from buyers who, despite the economic and international context, are resuming vehicle purchases. We will have to wait for the evolution in the coming months to determine if it is a one-off situation or a first sign of a recovery in demand,’ commented Aránzazu Mur, director of economics and logistics at ANFAC.

Spain had a poor start to 2022, with vehicle-tax increases introduced on 1 January. Although the supply situation is expected to improve, the recovery is weaker than anticipated before the war in Ukraine. In the first five months of 2022, a total of 318,487 new cars have been registered, equating to a year-on-year decline of 11.8%.

Autovista24 has modestly reduced its 2022 outlook for Spain, predicting 836,000 new-car registrations, marking a year-on-year decline of 2.7%. Looking ahead more positively to 2023, Autovista24 forecasts that the Spanish new-car market will exceed the one-million mark, with year-on-year growth of 25.5%.

‘The current situation of registrations leads us to a market that will be closer to 800,000 than 900,000 units [in 2022], far from what the economy of our country needs and what the sector requires - taking into account investments that both manufacturers and dealers are doing to accelerate the decarbonisation of mobility,’ commented Raúl Morales, communications director of the dealer association Faconauto.