WE car market - despite resilient December, recovery running out of steam

WE car registrations: +2.0% in December; +5.8% in FY16; +1.5% in 2017E

The WE pc market was running at a December SAAR of 14.52m, up 3.5% from November’s 14.03m. At 13.97m, FY16 sales were 5.8% better than FY15’s 13.20m, but remained 4.8% below the 2000-07 LT pre-crisis level of 14.69m. (See pp.3-12 for details.)

Italy and Spain were again the fastest growing among the BIG 5 markets in December and FY16, but are still running some 20% below pre-crisis trend. In Germany, a 3.7% increase in December resulted in a 4.6% increase to 3.35m in FY16, topping LT pre-crisis level of 3.3m by 1.5%.

The WE car market is set to decelerate in FY17E and grow 1.5% to 13.98m. The expected moderate FY17E increase of 170k units should again be spear-headed by Italy and Spain.  

UK update: So far the vote for Brexit seems to have had little to no impact on the UK car market as sales dipped 1.1% in December, resulting in a 2.3% increase to a record 2.69m in FY16. (See pp.10-12.)  

Brexit update: although the Supreme Court’s recent ruling against the government stipulates a parliamentary vote, the government still hopes to be able to trigger Art 50 before the end of March. The growing involvement of parliament does not necessarily increase hopes for a SOFTER Brexit.

UK short-term outlook: The UK economy remained resilient in 2H16 and GDP grew 2.0% in FY16. This suggests a delay in the expected negative economic impact from the Brexit vote’s fall-out of a drastically weaker sterling and great uncertainty. The IMF now expects UK GDP to expand 1.5% in FY17E and 1.4% in 2018E. The UK car market is expected to have peaked at 2.69m in FY16 and to decline by -3.0% to 2.61m in FY17E. A weaker pound is set to trigger sharp increases in sticker prices as 90% of cars sold in the UK are imports.