Key European new-car markets improve as forecast in November

09 December 2022

The new-car markets of France, Italy, and Spain improved in line with Autovista24’s forecasts for November, explains senior data journalist Neil King.

Three of the key European new-car markets posted their fourth consecutive month of year-on-year growth in November. While the growth rates are misleading, set against a low base of comparison due to semiconductor shortages in November 2021, they do confirm Autovista24’s expectations for a modest recovery.

The year-on-year upturn in new-car registrations last month compared with October was greater in France, stable in Italy, and slightly weaker in Spain. Nevertheless, adjusting for the distortion caused by last year’s market turbulence, the seasonally-adjusted annualised rate (SAAR) made gains in all three markets.

Improvements in new-car supply are therefore outweighing the negative impact of the cost-of-living crisis on underlying demand. At least for now.

Modest outlook revisions

All three markets performed as expected last month and further easing of supply bottlenecks was already factored into Autovista24’s forecast for December. So, the 2022 outlooks for all three European markets have merely been tweaked.

However, the positive influence of supply will diminish as the order backlog clears. Furthermore, it will be negated by weakening new-car demand because of the cost pressures on both businesses and private buyers.

In this context, Autovista24’s forecasts for France and Italy have been downgraded for the coming years, although the outlook for Spain has been held. The biggest downgrade is in Italy, where the forecast has been reduced by about 15,000 units for the years 2023 to 2025. The outlook for France is about 9,000 units lower each year.

Significant risks to this challenging forecast remain. These include 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 diverse government measures to provide support to consumers - 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. According to VNC Automotive, the ‘semiconductor drought could soon become a flood of chips.’

The resulting 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.

Growth almost doubles in France

According to data released by the CCFA, the French automotive-industry association, 133,961 new cars were registered in the country last month. This aligns with Autovista24’s forecast of 133,000 units and the year-on-year growth of 9.8% almost doubled the 5.5% upturn in both September and October.

Moreover, the base of comparison was higher as the November 2021 contraction in the French new-car market (down 3.2%) was far weaker than in October 2021 (down 30.7%). Accordingly, the SAAR jumped from below 1.5 million units in October to almost 1.68 million.

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 four consecutive months of growth mean the cumulative decline in the year-to-date has improved to 8.7%. Nevertheless, the 1.37 million new cars registered in the first 11 months of this year is over 600,000 fewer than across the same period in 2019.

Linked to strikes at refineries, fuel shortages in France invariably derailed activity in October and boosted registrations last month. Supply improvements, the government cap on electricity costs, and the recent extension of electric-vehicle (EV) incentives to 31 December 2022 will support the market this month. But there is one less working day than in December 2021, which will suppress growth.

Autovista24 forecasts that the French new-car market will amount to 1.53 million units in 2022, marking a 7.7% decline on 2021. The outlook for next year has been subtly reduced to 1.77 million registrations, equating to growth of 15.3%. This is 20.2% lower than the 2.2 million new cars registered in 2019, prior to the COVID-19 pandemic.

Incentives support growth in Italy

Industry association ANFIA reports that 119,853 new cars were registered in Italy last month, up 14.7% from a year earlier. This tally is close to Autovista24’s forecast of 121,000 units, with the year-on-year growth rate subtly beating the 14.6% gain in October.

The base of comparison is low as the Italian market contracted by 24.6% in November 2021, but this was less dramatic than the 35.7% decline in October 2021. So, the SAAR increased to 1.52 million units last month, from 1.43 million units in October.

The Italian new-car market is contending with supply challenges and rising inflation, although consumer and business confidence improved in November. 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.

As November met expectations, the forecast for 2022 has only been subtly adjusted, with fewer than 1.32 million registrations anticipated, equating to a year-on-year decline of 9.8%.

This aligns with the view expressed by ANFIA president Paolo Scudieri: ‘Finally, as we enter the last month of the not easy 2022, we can now reasonably predict that the Italian car market will end the year at around 1.3 million registered units, a drop of about 10.5% compared to 2021.’

‘We hope that the remodulation of incentives, available since 2 November, with the extension of the ecobonus to rental companies can support the registrations of cars with zero and very low environmental impact in the months to come, and we reiterate the urgency of implementing the incentive measure for private charging infrastructure and in apartment buildings - an indispensable factor in orienting the private channel’s purchasing choices towards electrified vehicles,’ Scudieri added.

Any additional measures will take time to flow through to new-car registrations. Furthermore, mounting financial pressures mean Autovista24 has slightly reduced its 2023 outlook for Italy to 1.56 million units. At this level, the Italian new-car market would be 18.8% smaller than in 2019.

SAAR rebounds in Spain

A total of 73,221 new cars were registered in Spain during November, according to ANFAC, the country’s vehicle manufacturers’ association. The year-on-year growth of 10.3% was slightly weaker than the 11.7% gain in October but was against a higher base of comparison. This means the SAAR rebounded to 977,000 units, having dipped below 900,000 units in October.

‘The vehicle registration data for November confirm the worst scenario for the end of this year, which will hopefully be around 820,000 units sold, something that takes us back to the 2008 crisis. It also confirms the diagnosis we have been making: the main problem that has continued to drag down the market is the bottlenecks in the supply of vehicles, to which has been added the sharp increase in the price of fuel, which has demobilised many sales,’ explained Raúl Morales, director of communications at dealer association Faconauto.

‘In addition, we have been heavily influenced, like most sectors, by a fall in household consumption due to the rise in inflation, the increase in interest rates and a general uncertainty that is reducing households' intention to purchase a vehicle,’ Morales added.

As new-car registrations in November only marginally exceeded Autovista24’s forecast of 72,000 units, the change to the 2022 forecast is negligible. At 820,451 units, this aligns exactly with the view expressed by both Faconauto and ANFAC, marking a year-on-year decline of 4.5%.

‘In the short term, only an improvement in the supply of dealer stock and a change in the trend in petrol prices can begin to alleviate a market that faces 2023 with a lot of uncertainty,’ Morales said.

Autovista24 has held its 2023 forecast for 975,000 new-car registrations, meaning the Spanish market is not expected to exceed one million units again until 2024.