European new-car markets post deceptive growth in October

04 November 2022

The new-car markets of France, Italy, and Spain recorded their third consecutive month of year-on-year growth in October but the figures are deceiving, explains Autovista24 senior data journalist Neil King.

The third consecutive month of year-on-year growth in three key European new-car markets suggests a broad recovery of the beleaguered automotive sector. However, last month’s figures are against a low base of comparison in October 2021, when semiconductor shortages caused year-on-year declines of at least 20%.

Growth rates are therefore distorted by last year’s market turbulence. Changes to the seasonally-adjusted annualised rate (SAAR) present a clearer picture. The SAAR gained slightly in Italy, buoyed by fresh incentives, but retreated in France and Spain.

This slowdown suggests that although new-car supply continues to improve, the impact of the cost-of-living crisis on demand is filtering through to registrations.

Outlooks downgraded

Supply improvements remain factored into Autovista24’s 2022 forecasts for all three European markets. However, this positive influence is negated by weakening new-car demand because of the cost pressures on both businesses and private buyers. Furthermore, all three new-car markets performed below Autovista24’s expectations last month.

Accordingly, the outlooks for all three markets have been downgraded for 2022 and the coming years. The biggest downgrade is in France, where the forecast for 2022 has been reduced by over 40,000 units to below 1.53 million new-car registrations. Almost 100,000 fewer registrations are now anticipated in 2023 and 2024. The 2022 assumptions for the Italian and Spanish markets are 24,000 and 7,000 units lower, respectively.

Significant risks to this challenging forecast remain, including the impact of developments in Ukraine on gas and electricity prices, as well as automotive supply chains. Additionally, the cost-of-living crisis is already weakening underlying demand but how much further inflation and interest rates will rise - and the effectiveness of diverse government measures to provide financial support to consumers - remains to be seen.

Fuel shortages disrupt French market

According to data released by the PFA, the French automotive-industry association, 124,982 new cars were registered in the country last month. The year-on-year growth of 5.5% replicated the upturn in September. However, the base of comparison was lower as the October 2021 contraction in the French new-car market (down 30.7%) was more dramatic than in September 2021 (down 20.5%). Accordingly, the SAAR fell back below 1.5 million units, from 1.8 million in September.

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 three consecutive months of growth mean the cumulative decline in the year-to-date has improved to 10.3%. Nevertheless, the 1.24 million new cars registered in the first 10 months of this year is 600,000 fewer than in the same period in 2019.

The fuel shortages in France, because of strikes at refineries, invariably affected registrations last month, but also renewed interest in electric vehicles (EVs). Higher oil prices and the government cap on electricity costs have also benefitted EVs, the share of which has risen to 21% so far this year, up from 18% in 2021, according to the PFA. Furthermore, the recent extension of EV incentives to 31 December will pull some demand forward from 2023, but supply will ultimately dictate the market’s performance in 2022.

Autovista24 assumes that the French new-car market will perform better in the last two months of 2022 than in October, but the forecast of 1.53 million units marks a 7.8% decline on 2021. The outlook for next year has been reduced to 1.78 million new-car registrations, equating to growth of 16.1%. This is 19.8% lower than the 2.2 million new cars registered in 2019, prior to the COVID-19 pandemic.

Modest SAAR growth in Italy

Industry association ANFIA reports that 115,827 new cars were registered in Italy last month, up 14.6% on a year earlier. This year-on-year growth exceeds the respective increases of 9.9% and 5.4% in August and September. However, the new-car market contracted by 35.7% in October 2021, compared to a 32.6% downturn in September 2021. The SAAR therefore only increased modestly to 1.43 million units, from 1.39 million units in September.

The Italian new-car market is contending with supply challenges, falling consumer confidence, and rising inflation. On the plus side, however, it is benefitting from purchase incentives for EVs, which were reinstated on 25 May. Furthermore, at the beginning of August, the Italian government extended the availability of incentives to rental and leasing companies, which were previously excluded.

‘Undoubtedly, the recent reshaping of incentives and, above all, the extension of the ecobonus to rental companies will stimulate market recovery until the end of the year. We now hope that the incentive measure for private and condominium infrastructures will also be implemented quickly, a necessary step for the spread of electrified mobility and the consequent renewal of the vehicle fleet towards complete decarbonisation,’ commented Gianmarco Giorda, director of ANFIA.

These measures will take time to flow through to registrations, as evidenced by the modest market gains in October. Given this and mounting financial pressures, Autovista24 has downgraded the 2022 forecast to below 1.32 million units, a year-on-year decline of 9.7%. The outlook for 2023 has also been reduced to 1.57 million units. At this level, the market would be 18% smaller than in 2019.

Loan costs curtail purchases in Spain

A total of 65,966 new cars were registered in Spain during October, according to ANFAC, the country’s vehicle manufacturers’ association. The year-on-year growth, of 11.7% was slightly weaker than the 12.7% gain in September, even against the lower base of comparison of October 2021, when the market contracted 20.5% year on year. This means the SAAR fell below 900,000 units, having exceeded one million units in September for the first time in 2022.

‘The market continues to suffer the consequences of the microchip crisis and the manufacturing rhythm problems caused by the shortage of these components. Likewise, we must add the economic uncertainty that is conditioning the purchase decision, among other causes, being conclusive factors to reflect that the accumulated figure for the year remains negative, with a decrease of 5.8% and 666,247 units in total,’ ANFAC stated.

Tania Puche, director of communications at ANFAC, also highlighted that loans are becoming increasingly expensive. ‘This circumstance, in a market in which 80% of vehicles are financed, stops families who want to embark on the purchase of a car. If we add to this situation that the chip crisis continues to take its toll on supply, everything indicates that we will close the year with around 820,000 units.’

This aligns with the subtly downgraded Autovista24 forecast, which anticipates 819,000 new-car registrations in 2022, marking a year-on-year decline of 4.7%. The 2023 forecast has also been reduced by over 20,000 units, meaning the Spanish market is not expected to exceed one million units again until 2024.