Ukraine war plunges EU new-car markets to lowest SAAR since May 2020

04 April 2022

Autovista24 senior data journalist Neil King considers the impact of the Ukraine war on new-car registrations in key EU markets in March.

The Ukraine war had significant ramifications for registrations of new cars in France, Italy, and Spain last month after clear signs of improvement in February. The markets endured severe double-digit year-on-year declines as rising living costs and fuel prices curtailed demand, and automotive supply chains were disrupted. Moreover, the seasonally-adjusted annualised rate (SAAR) in all three countries plunged to its lowest level since Europe started to emerge from COVID-19 lockdowns in May 2020.

The French new-car market contracted by 19.5% year on year, but Italy and Spain were even more afflicted, with registrations 30% lower than a year ago. As inflationary pressure mounts and supply-chain disruption compounds pre-existing challenges, Autovista24 has revised the 2022 outlook for all markets further downwards.

Lower expectations

The current assumption is that the inflationary pressure and disruption to car production will persist in the short term before subsiding later in the year. Nevertheless, the expectation of supply improvements is lower than factored into the Autovista24 March forecast. With registrations displaced into 2023, double-digit growth of over 20% is expected in all three countries.

There are significant downside risks to this challenging forecast, 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 2008-2009, the registrations outlook for western European markets hinges more on new-car supply than any economic impact on sales. However, reduced – or even fully disconnected – gas supplies from Russia to continental Europe also pose a major economic threat.

French new-car market weakest since May 2020

According to data released by the CCFA, the French carmakers’ association, 147,079 new cars were registered in the country last month, equating to a year-on-year contraction of 19.5%. This marks a deterioration on February’s 13% downturn. Autovista24 calculates that the SAAR fell to 1.41 million units – the lowest level since May 2020.

The French new-car market has been heavily affected by regulations that came into effect 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 that weigh over 1.8 tonnes. The war in Ukraine has derailed the market correction that began in February, with the cumulative decline in the first quarter slipping to 17.3%.

Incentives for electric vehicles will be reduced by €1,000 from 1 July 2022 but the greater impact comes from supply concerns. Autovista24 has downgraded its forecast for 2022 to a decline of 2.4%, to below 1.62 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 21.5%, nudging two million units. Nevertheless, this remains about 11% lower than the 2.2 million new cars registered in 2019, prior to the pandemic.

Forthcoming incentives add to Italy’s woes

Industry association ANFIA has reported that 119,497 new cars were registered in Italy last month. This marked a year-on-year contraction of 29.7%, following the 22.6% downturn in February. As in France and Spain, the SAAR was at its lowest level since May 2020, at just 1.11 million units. The Italian new-car market contracted by 24.4% in the first quarter of 2022.

Aside from the inflationary and supply impact emanating from the war in Ukraine, new-car sales in Italy are also restrained as consumers await the reintroduction of purchase incentives.

‘The worrying decline in registrations is largely attributable to the wait for the implementation of the demand support measures announced by the Energy Decree on 18 February, the first step in a multi-year plan to support the demand for zero and low-emission cars,’ said Paolo Scudieri, president of ANFIA.

Any improvement in new-car sales will be overshadowed by supply constraints and rising inflation in Italy, which already climbed to 6.7% in March according to the national statistics institute Istat. Furthermore, there are limitations to the incentives based on the latest proposal.

‘According to the latest draft of the decree, the incentive measures would seem to exclude the company-car sector, except for car-sharing companies, that could, instead, benefit from them. If confirmed, this approach would, in our opinion, constitute a strong limitation, since it is a sales channel that is able to make an important contribution to the spread of electric mobility,’ Scudieri explained.

Given the impact of the Ukraine war and the limitations of the forthcoming incentives, Autovista24 has reduced its forecast for 2022 down to 1.41 million new-car registrations, equating to a year-on-year decline of 3.6%. At this level, the market will be 27% smaller than in 2019. Registration volumes are forecast to rebound by 23% in 2023, to 1.73 million units, but this would still be 10% lower than in 2019.

Truck drivers’ strike delays deliveries in Spain

A mere 59,920 new cars were registered in Spain during March, according to ANFAC, the Spanish vehicle manufacturers’ association. This equates to a year-on-year contraction of 30.2% and is even lower than the volume of cars registered in February. The SAAR plunged to 569,000 units – the lowest level since May 2020, the same as in France and Italy. In the first quarter of 2022, a total of 164,400 new cars were registered, representing a year-on-year decline of 11.6%.

In addition to the impact of the Ukraine war on new-car demand and supply, a national truck drivers’ strike from 14 March significantly delayed vehicle deliveries last month.

‘The strike of vehicle carriers and transport in general has severely affected car registrations in the last month, which, except for the pandemic, registered the lowest figure for a month of March in the historical series. ‘In addition to the crises in the supply of raw materials and the rise in energy prices, brands have thousands of vehicles stuck in fields with difficulties in reaching distribution,’ commented Noemi Navas, director of communications at ANFAC.

‘The combination of these negative elements together with the conflict in Ukraine does not benefit demand, with consumers preferring to wait for the situation to clear up before buying a new car. There is no doubt that the recovery of the market will have to wait at least another year,’ Navas concluded.

Spain had a poor start to 2022 with vehicle-tax increases introduced on 1 January. ‘Beyond bonuses to compensate for the rise in prices, the government should undertake structural reforms that, in the case of the automotive sector, involve not only reducing VAT on fuel to a minimum but also implementing a tax scheme that does not tax the purchase of the car and thus avoids penalising the renovation of the parc and the achievement of decarbonisation objectives,’ stated Tania Puche, communications director of the automotive association GANVAM.

Although the supply situation will improve in the short term in Spain, the recovery will be weaker than anticipated in 2022 because of the war in Ukraine. Autovista24 has revised its 2022 forecast for new-car registrations in Spain down to 836,000 units, marking a year-on-year decline of 2.8%.

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 25.7%.