The UK’s June drop was in contrast to the region’s other major markets, which all reported sales increases. Germany, Europe’s largest car market, reported an 8 percent rise in registrations. France’s volume was up 0.8 percent. Italian sales increased 12 percent while car sales in Spain climbed 11 percent.
Britain’s vote to leave the EU, the so-called Brexit, is expected to slow economic growth in countries using the euro, according to the European Central Bank, which has kept interest rates at or below 0 percent as a stimulus. Prior to the vote, eurozone economic confidence weakened amid questions about how the UK’s exit from the EU would affect the region.
“Drastically reduced consumer confidence in the UK following the Brexit vote will probably result in a significant hit to sales,” Peter Fuss, an automotive analyst at consulting firm EY, said in a report. “Not least the German carmakers will see an impact in the form of lower exports to the UK, as cars made in Germany get more expensive for British buyers because of the weak pound.”
After the Brexit vote, analysts at Morgan Stanley lowered their prediction for full-year western European car sales growth to 3.7 percent from 5 percent. The firm foresees significant slowdowns in the growth for Italy, Germany and France. It also now expects UK car sales to decline 3.3 percent. Before the vote it forecast a 2.5 percent drop. Looking further into the future, Morgan Stanley predicts European sales will decline by 2.2 percent next year. Its previous forecast was for 2017 sales to rise 0.2 percent.
Analysts at ISI Evercore gave much gloomier predictions for the UK car market. It sees sales falling 4.5 percent this year and 10 percent in 2017. It previously predicted UK sales would rise 3 percent this year and decline 2.5 percent in 2017.