Electrification, fine avoidance and technology will anchor 2020

9 January 2020

A key feature of the European automotive landscape in 2020 will be the push for electrification. Manufacturers will seek to reduce their CO2 emissions to avoid or at least minimise fines for exceeding the stricter 95g/km corporate average fuel economy (Clean Air for Europe – CAFE) target that comes into force in 2021. The industry will also continue to contend with other challenges such as the rapid development of autonomous and connected vehicle technology.

To help navigate this challenging landscape, Autovista Group has gathered key predictions for 2020 from our market experts in each of the EU5 countries. In part one, we analyse the landscape for France and Germany.

France

• As of 1 January 2020, the French government imposed a new ″bonus-malus″ (bonus/fine) taxation scheme in France, which penalises cars with CO2 emissions over 110g based on NEDC-correlated values. We therefore expect a contraction of about 3% in the new-car market in 2020 although this will support used-car demand, which we forecast will grow by about 2%, bolstering residual values.
• Despite political sentiment being against diesel cars and favouring petrol, the latter will be more heavily penalised in the new system. As a result, we expect residual values of used petrol cars to increase, whereas there was a stabilisation of both petrol and diesel RVs in 2019.
• Conversely, we expect higher diesel sales in the new-car market and this will potentially have a negative impact on residual values, as demand for used diesels is still high and stable.
• A second bonus-malus scheme will be introduced in March 2020, based on WLTP values. Demand for brands and models with higher NEDC-correlated emissions figures than under WLTP will therefore suffer in the first quarter of 2020. To mitigate against this, some brands have been pushing tactical registration volumes in order to sell more used cars in the first three months of 2020 than new cars. However, this will negatively influence RVs as brands clear dealer stocks by providing 0km vehicles with strong discounts.
• Additionally, the French government has announced the lifting of the cap on the malus (tax penalty), in order to penalise especially the most polluting cars. Cars emitting more than 184g CO2/km will have to pay a €20 000 fine. This will make them unpopular as new cars but will reinforce their attractiveness as used cars, positively impacting their RVs. This, in turn, will be a fillip for the import of sporty used cars, especially from Germany.
• Another consequence of the introduction of both the WLTP and CAFE regulations will be a reduction in new cars offered with engines rated between 160 and 180hp. There will therefore be a greater supply of 115-130hp engines on the used-car market, which will lead to reduced RVs for less powerful engines whereas RVs for more powerful engines will increase.
• The bonus for private buyers of BEVs remains at €6,000 in 2020 before decreasing to €5,000 in 2021 and €4,000 in 2022. However, the bonus for B2B and fleet customers decreased to €3,000 in January 2020. Additionally, a new law on the orientation of mobility (LOM) dictates that at least 20% of car purchases by larger fleets have to be electric (either BEVs or plug-in hybrids). Yoann Taitz, Operations Director of Autovista Group in France predicts: ′they will request higher discounts from OEMs to compensate for the €3,000 lower bonus.’
• BEV sales volumes will also have to be much higher in 2020 for brands to avoid or limit fines with the introduction of the lower-emissions target. As this comes at a time when the competition will strengthen, Taitz expects higher discounts for private buyers as well as B2B customers, which will be negative for RVs.

Germany

• The ZDK (German Federation for Motor Trades and Repairs) expects the volume of new-car registrations to decline to less than 3.3 million units in 2020. Autovista foresees a more stable level of passenger car registrations, at about 3.5 million units as a result of launches of some high-volume models across the year.
• CO2 penalties will strongly influence the new-car market and lead manufacturers to focus on BEVS, low-emission vehicles and mild-hybrid diesels. This will have consequences for the portfolio of used cars offered in 2021-2025, although not all registrations will necessarily be absorbed by the German market.
• Industry associations expect the used-car market to decline slightly in 2020, according to the ZDK. Autovista notes that a high volume of exports of diesel cars, BEVs and plug-in hybrids drove the decline in changes of ownership in 2017 and 2018. As this effect faded out in 2019 and supply from fleets and tactical registrations grew slightly, stability should come through in 2020.
• RVs of diesel cars stabilised in 2019 after two tough years and appear to have bottomed out. This is mainly because of the lower supply from fleets (2-4 year-old cars) and from tactical registrations (one-two-year-old cars).
• Petrol RVs have passed their peak in the wake of rising volumes following the diesel crisis. These volumes now risk exceeding demand, putting pressure on values, but demand for used petrol cars remains stable as they are unaffected by CO2 penalties, which are applied to new-car registrations.
• RVs of electric vehicles have risen in recent years and continue to do so. Demand will also continue to rise, as new-model launches strengthen the offer across segments and increase competition. However, the manufacturer focus on these vehicles will put pricing under pressure and, ultimately, impact residual values.

• There is an acute risk for plug-in hybrids as real-life fuel consumption data will increasingly be recorded and compared against figures used for homologation purposes. This could potentially lead to the CO2 emissions and fuel consumption figures of PHEVs being recalculated, with repercussions for tax liabilities, total cost of ownership and, ultimately, demand and values.

Part 2 of Autovista’s 2020 predictions will be published on 10 January and feature Italy, Spain and the UK.