EU new-car markets improve in February ahead of Ukraine disruption

03 March 2022

Autovista24 senior data journalist Neil King considers the improvement in registrations of new cars in key EU markets in February, and the impending impact of events in Ukraine.

New-car registrations in France, Italy, and Spain showed clear signs of improvement last month after the weak start to the year. Although there were double-digit year-on-year declines in France and Italy, the results are still encouraging given the environment of rising inflation and ongoing supply constraints. This applies even more to Spain, where the volume of new cars registered in February rose by 6.6% year on year.

Russia’s invasion of Ukraine may not dramatically impact new-car sales, i.e. order intake, in the three countries but it is already adding further disruption to beleaguered automotive supply chains. This will inevitably impact deliveries of some new cars and, ultimately, delay registrations in the coming months.

Ukraine-induced forecast downgrade

Despite the further squeeze on household budgets as fuel and gas prices have risen sharply in the past few days, and the impending economic consequences of sanctions imposed on Russia, the impact on demand for new-car purchases across western Europe is expected to be limited.

This volume of new cars imported into western Europe from Russia or Ukraine is low. However, the conflict is disrupting automotive supply chains, with several car manufacturers suspending production in European plants beyond Russia and Ukraine. These production stoppages add to the car industry’s existing supply-chain woes and will impact deliveries of numerous models. This will affect registrations of new cars already in March, but the impact will be far greater from April as delivery delays leave orders unfulfilled. The month of April will be further weakened as there will be one less working day in France, Spain, and Italy than in 2021.

Autovista24 assumes that the disruption to car production will reduce throughout the year, albeit after securing alternative supply of critical raw materials and/or components that are sourced from Russia and/or Ukraine. Nevertheless, the expectation for the supply improvements that are factored into the outlooks for new-car registrations, has been lowered. Moreover, not all losses are forecast to be recovered by the end of 2022. Consequently, the previous positive forecasts for France, Spain and Italy are now negative. With registrations displaced into 2023, double-digit growth of about 20% is expected in all three countries.

There are significant downside risks to this challenging forecast, however, depending on the duration and severity of the conflict in Ukraine, and whether it extends beyond the country’s borders. Unlike previous crises, such as the global financial crash of in 2008-9, the registrations outlook for western European markets hinges far more on new-car supply than any economic impact on sales.

New-car market correction in France

According to data released by the CCFA, the French carmakers’ association, 115,386 new cars were registered in the country last month, equating to a year-on-year contraction of 13%. This marks an improvement on the 18.6% downturn in January, when there was one more working day than in 2021. On an adjusted basis, Autovista24 calculates that the market fell by 22.5%.

January was heavily affected by new regulations that came into effect at the start of the year and increased car prices. The malus (penalty) for registering new cars extended to those with CO2 emissions of 128g/km or more and a weight-based tax was introduced too, which applies to all new cars that weigh over 1.8 tonnes.

The subsequent market correction in February was exactly in line with Autovista24’s expectations and the cumulative decline in the first two months of the year reduced to 15.7%.

Incentives for electric vehicles will be reduced by €1,000 from 1 July 2022 but the greater impact comes from supply concerns in the wake of events in Ukraine. Autovista24 has revised its previous growth forecast for 2022 to a decline of 1.6%, to 1.63 million units. On a more positive note, many new cars ordered in 2022 will be delivered in 2023, when the French market is forecast to expand by 20.5%, 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.

Incentives to return in Italy

Industry association ANFIA has reported that 110,869 new cars were registered in Italy last month. This marked a year-on-year contraction of 22.6%, following the 19.6% downturn in January. As in France and Spain, there was one more working day in January than in 2021. Accordingly, on an adjusted basis, Autovista24 calculates that the market suffered a greater 23.7% decline than last month.

Nevertheless, the Italian new-car market is 21.1% weaker than in the first two months of 2021. This is despite the already low volumes early last year, which were 13.1% down, cumulatively, on the pre-pandemic level achieved in 2020.

‘This further worsening partly derives from the 'expected effect' in relation to the 2022 incentive measures provided for thanks to the funds allocated with the bill decree, which is soon to be issued and will define in detail,’ said Paolo Scudieri, President of ANFIA.

‘A first step has finally been taken in Italy to support the energy transition of the automotive-supply chain. In addition to the fundamental interventions on demand, in continuity with what was done in 2021 to support the spread of zero and very low-emission technologies, and according to a multi-year programming, we expect a set of accompanying tools to be defined as soon as possible,’ Scudieri added.

Countless Italian consumers are therefore postponing the purchase of new cars until incentives return, but any improvement in sales will be overshadowed by the increased supply issues stemming from events in Ukraine.

‘Finally, it goes without saying that the current conflict in Ukraine represents an element of great uncertainty and concern, not only as a destabilising element for the European economy, but also for the direct repercussions on our sector, including the risk of further production stops due to a lack of components produced in the country targeted by the attack, at a time when the crisis of raw materials, microchips and logistics and the rise in energy prices are still a daily reality,’ Scudieri concluded.

Despite the planned reintroduction of incentives, Autovista24 has reduced its forecast for 2022 down to 1.44 million new-car registrations, equating to a year-on-year decline of 1.4%. At this level, the market will be 25% smaller than in 2019. Registration volumes are forecast to rebound by a 19% in 2023, to 1.71 million units, but this would still be 11% lower than in 2019.

Spanish car-rental companies ’on the ropes’

A total of 62,103 new cars were registered in Spain during February, according to ANFAC, the Spanish vehicle manufacturers’ association. This equates to 6.6% year-on-year growth and is almost 50% higher than the volume of cars registered in January, which was weakened by the rise in registration taxes at the start of the year.

In the first two months of 2022, a total of 104,480 new cars were registered, representing 4.2% growth compared to the previous year. However, Tania Puche, communications director of the automotive association GANVAM, highlights that ‘the market continues to register monthly volumes that are more than 35% below pre-pandemic levels.’

Puche also identified ‘the extremely weak behaviour of the rental companies; the global microchip crisis puts them on the ropes because, although they have the financial muscle to buy, they do not have an offer to supply their fleet.’

As the supply situation will deteriorate further because of the events in Ukraine, Autovista24 has revised its forecast for Spain in 2022 down to 850,000 units, marking a year-on-year decline of 1.1%.

‘If the tensions in the supply chain were expected to improve throughout 2022 and release part of the retained demand, the invasion of Ukraine by Russia knocks down the forecasts, taking into account that both countries supply raw materials for the manufacture of both vehicles and technological devices,’ Puche commented.

Looking ahead more positively to 2023, Autovista24 still forecasts that the Spanish new-car market will exceed the one-million mark, with year-on-year growth forecast to be 22.5%.