Car registrations in the European Union (EU) went up 16% year on year during May, with optimism the growth should continue despite economic and political challenges.
According to data published by the European Automobile Manufacturers' Association (ACEA), the number has risen from 1,110,437 units to 1,288,220 units.
This has further contributed to the regional performance in the year to date (YTD), with growth now hitting 9.9% as registrations reached 6,383,263 units.
The biggest improvement has come from the French, Spanish and Italian markets, all three of which recorded an increase in registrations of over 20% year-on-year.
Although the seasonality played a part, a general improvement in the marketplace also played a part. Germany has also had a positive month with registrations up by 11.9% – behind the regional market as a whole.
Out of this group, the UK's rate of growth was the most sluggish, with a gain of 2.5%.
Carlos Da Silva, manager of IHS Automotive's European light-vehicle sales forecast, said: “It should be noted that while it did have similar calendar benefits, it is also at the top of a sales cycle after record-breaking sales last year, although this is expected to increase further during 2016, albeit at a slower rate.”
Outside this group, the market trend is predominantly double-digit percentage gains.
“As with some of the larger markets, seasonality has compounded a general economic improvement in these countries as well as a general need for fleet replacement after a prolonged state of weakness.
“These include Portugal, Greece and a host of markets in Central Europe that are continuing to record improvements on the relatively low base of comparison. More stable markets such as Sweden and Poland have also recorded double-digit percentage gains though, with the former set for another year of record-breaking improvement.”
Some carmakers' growth rates are behind the market as a whole, some quite significantly.
Amongst this group is the leading Volkswagen (VW) Group which has recorded an increase of 9.3% year-on-year to 309,708 units, resulting in its market share falling by 1.5% to 24%.
Audi's registrations grew by around 20%, supported by recent launches like the A4 and Q7, and Skoda's growth has been on a par with the wider region, but its Volkswagen has increased just 4.1%, not helped by the age of some of its mainstay models.
“On top of this, the Seat brand's sales have been flat, although it will be looking forward to the introduction of its new Ateca crossover which is expected to bolster its performance as well as providing an entry into the popular compact crossover category.
“The VW Group's struggles in earlier months are also reflected in a YTD rate of growth behind the market.
“This situation has allowed other large automakers in the region to close the gap.”
PSA has increased 18.7% year-on-year as all three of its brands recorded a similar rate of growth.
However, the 135,442 units that were registered only took it to third in the month, having been overtaken by Renault Group which jumped 28.7% to 137,102 units.
This was underpinned by a 35.5% increase by the Renault brand, helped along by a range of new models introduced in the past 18 months.
Fiat Chrysler Automobiles (FCA) has also had a strong month, up 25.7%, as it took advantage of the upsides in its domestic market of late.
Elsewhere, premium OEMs mainly followed in the footsteps of Audi in terms of their growth rates.
BMW Group, for example, recorded a 21.2% gain, although Daimler fell behind the wider regional growth rate but still managed to increase by 14.3%.
Jaguar Land Rover's investment in new models has again paid dividends as its overall gains improved 26.1% as Jaguar's new XE, XF and F-Pace helped this brand to jump by 134.6%.
Volvo Cars had a more moderate growth rate in May with an increase of 12.5%, but with many new models in the pipeline over the next couple of years, it would be unsurprising if it beat the market growth rate again in future.
Outlook and implications
This is now the 33rd month of growth for the European market and it looks set to remains in “positive shape” in the near term.
Da Silva said that although there has been some technicality at play though the calendar benefits already noted – some markets experiencing up to three additional selling days – even with this taken into account, the overall trend of the market remains virtually unchanged with regards to its upward trajectory.
“This continues to be fed by a release of pent-up demand, most notably in southern European markets, from when both private and corporate customers were unable to justify replacing an existing vehicle.”
This decision is now partly forced by current vehicles becoming so old (reflected in the fast rising car parc ages in the region) that there was little alternative to renew.
“On its own this still does not explain the full extent of the market's current momentum, and points to the fact that Europe has been benefiting from a quite spectacular and, frankly, unbelievably good microclimate lately.
"On the one hand, at macro level, the situation is still depressing on absolute terms such as GDP, unemployment, investment, but on relative terms the gains are sufficient enough to impulse a much more optimistic cycle.
"Other benefits that have also favoured the market for some time include low oil prices, inflation and interest rates, the latter contributing to very competitive finance deals.”
New and renewed model ranges are helping as well, following a trough during the crisis, many of which are tapping into extremely appealing categories such as crossovers. Furthermore, technological progress has made any new vehicle a clear step forward in terms of efficiency – notably on carbon dioxide (CO2) – making new cars a compelling proposition for buyers who are certainly more cost-conscious than ever.
“Based on these considerations, in the very short term, there is no obvious reason to think that the European market could see its trajectory altered.
“Although risks remain, including the general global economy which is doing well but not exceptionally so, and any relapse would be a blow for the region. In addition, the EU is facing steep challenges, most notable being the UK's referendum with regards to its future in the EU. Also, and as noted above, a fair part of the current momentum is linked to a positive but largely subjective interpretation of the current situation comparing to the crisis years.
“We do know this can evolve quite rapidly. If anything, the latest confidence surveys processed by the EU might suggest that we are entering a more muted phase.
"Europe should keep growing as it benefits from strong tailwinds but this is not saying that the sky is totally blue without any cloud on the horizon.”
IHS Automotive anticipates that registrations of passenger cars in EU+EFTA will increase by around 5% year-on-year during 2016 almost 14.97m units, up from a low of 12.36m units seen in 2013. It anticipates weaker gains towards the end of the decade when levels are expected to peak at over 15.2m in 2019.