A four-year post-recession run of sales growth slowed to a halt in 2018, with the European market slipping into negative territory, down by 0.04 percent, and the Western European market down by 0.7 percent. Final figures for 2019 were not available at press time, but the overall market is expected to be flat.
For next year, analysts are predicting that European sales will fall somewhat. LMC Automotive is forecasting a decline of 1 percent in Western Europe in 2020.
Jonathon Poskitt of LMC said in a note: "We are now a little more cautious on 2020, with overall volumes expected to be lower than this year. Economic challenges remain, particularly in light of the external trade environment and Brexit uncertainty." He said that there is a risk that automakers may have to take action that could have an effect on total market volumes because of forthcoming CO2 targets.
Moody's is more bearish, predicting that Western European sales will drop by 3 percent in 2020, revising downward an earlier forecast. Factors in the slowdown include uncertainty around Brexit, and a weakening macroeconomic environment, especially in Italy and Spain. However, Moody's noted that the European market has been at a high level of sales for several years, and that a slowdown in 2020 would return the market to 2017 volumes.
Separately, IHS Markit is forecasting a 2 percent decline in EU plus EFTA sales (Iceland, Norway and Switzerland). "We are seeing a slight decline," said IHS Markit analyst Martin Benecke, noting that formerly strong growth markets in Central and Eastern Europe are now more closely tracking Western European countries.
"On the economic side, the ongoing Brexit uncertainty is holding back investment, not only in the UK but in other nations," he said. On trade issues involving China and the U.S, "It's not clear what's going to happen," he added.
Emissions question
But emissions compliance remains the main question around sales this year, Benecke said, for a number of reasons. Model portfolios will change as higher-polluting cars with older technology are pulled in favor of full-electric cars, plug-in and regular hybrids, and mild hybrids. This in turn will increase prices overall, possibly affecting demand, he said.
Automakers could also push diesel sales, even though the future of the powertrain has been in doubt because of fallout from the Volkswagen Group cheating scandal. After several years of sharp declines, tied to a loss of consumer confidence, increasing cost of emissions compliance and the effects of current and future diesel bans, sales have stabilized somewhat.
Benecke said IHS forecasts that the diesel market share in 2020 will be 31 percent, just one percentage point below 2019's figure. Nevertheless, the powerplant's long-term future is in doubt, he said, because it is increasingly difficult to find further gains in CO2 emissions.
Another unknown is how automakers will ensure that enough low-emissions vehicles are sold to meet fleet emissions targets. Benecke noted that manufacturers have many levers to pull because relatively few cars are sold to private buyers. Those tools include self-registrations, favorable lease terms for employees, and sales to short-term (car-sharing) and traditional rental fleets. Said Benecke: "They have a lot of power to bring these vehicles to market."
