Spain’s new-car market bucks year-end improvement trend

05 January 2023

The new-car markets of France and Italy ended 2022 improving as Autovista24 expected. But Spain bucked the recovery trend, explains senior data journalist Neil King.

The Italian new-car market posted its fifth consecutive month of year-on-year growth in December and France was stable. Meanwhile, Spain engaged reverse, although this is set against a reasonable base of comparison in December 2021, when there was also one more working day than last month.

Moreover, the recovery continued in France and Italy and both markets performed in line with Autovista24’s expectations for December. Improvements in new-car supply continue to outweigh the negative impact of the cost-of-living crisis on underlying demand, except in Spain.

All three markets did endure single-digit declines in across 2022. Italy fared the worst, contracting 9.7% versus 2021, and France fell 7.8%. Meanwhile, Spain performed the best of the three markets over the entire year, declining by 5.4%.

Weaker outlook for Spain

As France and Italy performed as expected last month, Autovista24’s forecasts for full-year 2022 materialised. Despite the weakness in December, new-car registrations in Spain only came in 7,000 units lower than forecast, at 813,000 units versus 820,000 units. The deterioration in December is a greater shock to ANFAC, the country’s vehicle manufacturers’ association, which had forecast 830,000 new-car registrations in 2022.

The positive influence of supply will diminish as the order backlog clears and will be negated by weakening new-car demand because of the cost pressures on both businesses and private buyers. This was already factored into Autovista24’s forecasts, which have only been modestly tweaked for France and Italy as they performed as expected in December. The forecast for Spain, however, has been reduced by about 30,000 units for the years 2023, 2024, and 2025.

Significant risks to this challenging forecast remain. This includes the ongoing threat to supply chains and ballooning power prices stemming from the war in Ukraine. Additionally, the cost-of-living crisis is already weakening underlying demand. How much further inflation and interest rates will rise - and the effectiveness of government measures to provide support - remains to be seen.

In an upside scenario, lower demand for consumer electronics could see a quicker resolution of semiconductor shortages in the automotive industry. Any improvement in new-car supply would only be a short-lived benefit for new-car registrations, however, as the order backlog would clear quicker. Subsequently, markets would be more exposed to demand downturns and the net effect would ultimately balance out over time.

Decline masks SAAR growth in France

According to data released by the CCFA, the French automotive-industry association, 158,027 new cars were registered in the country last month. This aligns with Autovista24’s forecast of 161,000 units.

The year-on-year decline of just 0.1% ended four consecutive months of growth but translates to an upturn of 4.5% when adjusted for the additional working day in December 2021. Furthermore, the seasonally-adjusted annualised rate (SAAR) expanded to 1.81 million units, from 1.68 million in November.

The French new-car market has been heavily affected by regulatory changes introduced 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 weighing over 1.8 tonnes.

The war in Ukraine derailed the market correction that began in February but supply improvements, the government cap on electricity costs, and the extension of electric-vehicle (EV) incentives to 31 December 2022 subsequently supported the market. Nevertheless, the 1.53 million new cars registered in France in 2022 is almost 700,000 fewer than in 2019.

Autovista24’s outlook for 2023 has been subtly reduced to 1.76 million registrations, equating to growth of 15.3%. This is 20.4% lower than the 2.2 million new cars registered in 2019, prior to the COVID-19 pandemic.

2023 incentives confirmed for Italy

Industry association ANFIA reports that 104,915 new cars were registered in Italy last month, up 21% from a year earlier. This tally matched Autovista24’s forecast of 104,000 units, with the growth rate surpassing the 14.7% gain in November. Moreover, there was one less working day than in December 2021 and, on an adjusted basis, Autovista24 calculates that year-on-year growth was 26.7%. Similarly, the SAAR rose to 1.65 million units from 1.52 million.

The Italian new-car market is contending with supply challenges and rising inflation, although consumer and business confidence enjoyed their second consecutive month of growth in December. Conversely, the market is benefitting from EV purchase incentives, which were reinstated on 25 May 2022. Furthermore, at the beginning of August, the Italian government announced the availability of incentives to rental and leasing companies, which were previously excluded.

‘The 2023 incentives are now available for the purchase of new zero- and low-emission cars: an allocation of €575 million divided into the incentive bands 0-20g/km CO₂ (electric cars), 21-60g/km CO₂ (plug-in hybrid cars) and 61-135g/km CO₂, the first two of which are also available to the car-rental sector, and can be booked from 10 January. A measure that we hope will give a significant boost to the demand for green cars early in the year,’ commented ANFIA president Paolo Scudieri.

As December met expectations, the forecast for 2022 was confirmed, with fewer than 1.32 million registrations, equating to a year-on-year decline of 9.7%. Autovista24 is holding its 2023 outlook for Italy at 1.56 million units, equating to growth of 18.3%. At this level, the new-car market would be 18.7% smaller than in 2019.

SAAR deteriorates in Spain

A total of 73,927 new cars were registered in Spain during December, according to ANFAC. The 14.1% year-on-year decline ended four consecutive months of growth. Although the downturn is less severe when adjusted for working days, at 9.8%, the SAAR deteriorated slightly, from 977,000 units in November to 961,000 units last month.

‘Last year, the market has not been able to change its negative trend mainly due to the persistent bottlenecks in the supply of vehicles, which has greatly conditioned the activity of dealers. In addition, the rise in the price of fuel and of vehicles themselves have been circumstances that have had a negative influence. In the background, inflation, the increase in interest rates, and the uncertainty of households have eroded the capacity to consume. Dealers have seen this situation worsen in the last stretch of the year, when the market reflected a clear drop in demand,’ explained Raúl Morales, director of communications at dealer association Faconauto.

With 813,396 new-car registrations, 2022 marked the third year in a row where there were 400,000 units fewer than before the COVID-19 pandemic.

‘The uncertainty with which we closed 2022 prevents us from envisioning a change for 2023. We see two scenarios: bare growth of 5%, that is, 870,000 units, to which an additional 10% would have to be added if the bottlenecks in production are solved, with which we would go to 960,000 units. Neither of the two forecasts are good news, because we are very far from the figures we saw before the pandemic,’ Morales added.

In this context, Autovista24 has reduced its 2023 Spanish forecast to 943,000 new-car registrations, equating to growth of 15.9%. This falls 25% short of the volume achieved in 2019 and the Spanish market is not expected to exceed one million units again until 2025.

‘Everything will depend on whether the conflict in Ukraine ends, and the logistics chain is normalised so that more new vehicles can be delivered. It will also help to add new registrations if the government accelerates the measures to promote fast-charging points and direct aid for electrified vehicles. With a market below one million units, there is a real risk of loss of investment and employment,’ concluded Félix García, director of communications and marketing at ANFAC.