Europe 2023 car sales: Pent-up demand to fuel growth, but recession fears loom

PARIS -- The European auto industry suffered through one of its worst years by volume in 2022, but sales should pick up in 2023, according to three forecasters.

Dataforce said Thursday that passenger-car sales are expected to grow by 13 percent to 12.7 million units in the 30 countries that include the EU, the UK, and Iceland, Norway and Switzerland. The gains are expected from sales to rental companies, a working through of pent-up demand from private buyers, and increased dealer and manufacturer registrations, Dataforce said.

The European automakers’ lobbying group, ACEA, said Tuesday that passenger-car sales are expected to increase by 5 percent across the 26 EU countries to 9.8 million units.

Earlier last month, LMC Automotive said sales in Western Europe would increase by 7.8 percent in 2023 to 10.95 million. 

But both ACEA and Dataforce noted that even with expected increases, sales will remain well below 2019 pre-pandemic levels. Dataforce’s Benjamin Kibies said in a note that 2023 registrations would be 19 percent below 2019, while Sigrid de Vries, the director general of ACEA, said the 2023 total would still be 25 percent less.

“We are still in a crisis situation,” de Vries said on Tuesday at an event in Brussels where new ACEA president Luca de Meo of Renault laid out the group’s policy positions.

European sales were down by 4.1 percent in 2022, ACEA said last month, with sales in the EU countries falling 4.6 percent. Even so, most automakers recorded robust profits, as they prioritized production of high-margin models because of semiconductor shortages.

Dataforce said that sales would increase in 2023 despite “anything but supportive” economic conditions, including rising energy prices. The largest percentage increase is likely to come from sales to rental companies, which have not yet fully replenished their fleets from 2020, when private travel fell sharply because of pandemic restrictions.

“Rental companies will seize the opportunity to replenish their fleets as demand from other channels softens,” Dataforce said.

While automakers could sell nearly any car they could build in the last 18 months because of a severe shortage of semiconductors, competition is expected to heat up in 2023, Dataforce said. The semiconductor shortage is easing as demand for consumer electronics falls, while at the same time Chinese brands such as MG and BYD are making a serious push in Europe.

“The seller’s market is gradually becoming a buyer’s market again,” Dataforce said, leading to increasing self- and dealer registrations that can be discounted.

But a new round of dealer incentives will have to wait until automakers fulfill a huge backlog of orders – nearly a full year’s worth, Dataforce said. That will support growth in 2023.  

LMC sounded a similar note, writing that existing demand would prop up sales in the early part of the year, but that an expected first-half slide “into a recessionary period” will be felt by the auto sector. “Households continue to face the squeeze of higher prices and increased financing costs, which will affect their appetite to purchase big-ticket items,” LMC said.

One sector that will see slower growth is electrified – meaning full-electric and plug-in hybrid – vehicles, Dataforce said. Despite an influx of new models, EV prices remain high and the charging infrastructure continues to lag. Another factor is increased production of less-expensive internal-combustion vehicles to meet pent-up demand.