Europe’s car market is set to expand this year for the third straight year driven by a continued recovery of key southern European economies, following a strong 2015 that topped even the most bullish expectations of analysts and forecasters.
Powered by forecast gains in France, Spain and Italy, new-car registrations are expected to grow more than 3 percent to 14.46 million vehicles in western and eastern Europe this year, according to IHS Automotive, regaining roughly half of the market’s losses since volume peaked in 2007 at nearly 16 million. PwC and LMC Automotive see sales in Europe rising to 14.6 million in 2016.
“Overall, we are expecting to see the eurozone as an economy pick up. Unemployment levels are coming down particularly in key markets that suffered like Spain. So there are reasons to be positive about the outlook for Europe’s car market for 2016,” said LMC Automotive forecaster Jonathon Poskitt.
Last year’s sales of roughly 14 million were nearly 2 million units higher than just two years prior and the best result since the 14.5 million volume achieved in 2009, when some markets such as Germany – Europe’s largest – were artificially inflated by car scrappage schemes. “No one counted on that [strong sales result for 2015] 12 months ago,” Matthias Wissmann, head of the German auto industry association (VDA), said.
While sales in southern European markets such as Italy are still below past levels, other key markets are not. Germany rose to 3.2 million cars last year -- a level not seen since 2006, excluding the scrappage-induced rise to 3.8 million in 2009. The UK market reached a record high thanks to the combination of widely available cheap credit and channel-stuffing by carmakers.
Signs of a slowdown have started to appear, however, as the UK’s October registrations dipped for the first time in 44 months. Experts say the overall economic picture for Europe remains largely positive despite cooling demand in China, which reduced exports and discouraged business investments. What has helped offset the effect of China has been European consumer spending, the major driver of the recovery over the past eight quarters.
With inflation subdued, European Central Bank President Mario Draghi extended by a half year his stimulus program that includes flooding financial markets with 60 billion euros of freshly printed money every month and steepened penalties on bank deposits in its own vaults. Theoretically at least, both should bolster output and boost exports by keeping a lid on the euro’s value and prodding banks into lending more to the broader economy rather than stockpiling funds at the ECB.
The VDA’s Wissmann warned, however, that monetary policy could not solve Europe’s problems alone. “The expansive monetary policy of the EU and the low oil price is concealing many a structural weakness,” he said.
Some key new models coming to market this year might help to fuel consumer interest. The latest Mercedes-Benz E class is slated to arrive and so is Renault’s fourth-generation Megane. On the crossover front, VW will launch the new generation of its successful Tiguan. VW’s Spanish unit, Seat, will begin selling its first SUV and Audi is due to debut its Q1, which gives it an entry into the fast-growing subcompact crossover segment. Other brands will be able to count on a full year of sales from models that arrived in late 2015, such as the new Opel/Vauxhall Astra hatchback.