WESTERN Europe saw passenger car sales rise by 4.7% year on year to 1,095,477 units at the end of October, with the year-to-date (YTD) sales figure rising 2.9% y/y to 12,130,682 units in contrast to the UK car sales picture.
The UK market witnessed an accelerated fall of 12.2% year-on-year (y/y) in October to 158,192 units – a seventh successive monthly decline, leaving YTD sales volume down 4.6% y/y to 2,224,603 units.
What are the underlying causes?
The accelerated contraction in headline sales has been caused by a dramatic fall in diesel sales during the month – demand fell by almost a third, with 29.9% fewer registrations.
It is understandable that SMMT chief executive Mike Hawes may want the government to intervene in some way to promote the latest generation of Euro 6 diesel models, but it is unclear what the government can do to help directly at this point.
The current administration is bogged down in Brexit negotiations and is facing other difficulties and promoting diesel-engine passenger car sales will be low on its list of priorities.
Less confidence in market conditions
Weakened confidence and labour market slack will dilute workers’ ability and willingness to push for pay increases, despite higher inflation.
In addition the Bank of England’s first interest rate rise in exactly a decade to 0.5% in early November was a highly significant macroeconomic intervention that will both make borrowing more expensive and have the effect of eroding confidence.
Outlook a complex one
In summary, the picture is complex and not particularly positive in the short and medium term for stakeholders in the UK car market.
For the full year, IHS Markit forecasts that UK passenger car sales will fall from 2.69 million units in 2016 to a level of around 2.60 million units, a decline of 3.4% y/y, although given the current sales running rate, this may be subject to an adjustment.
In terms of the full-year market in Western Europe, IHS Markit sees sales at the figure of 14.4 million units, up from last year’s figure of 13.9 million units.
