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back to index backEUROtalk June,  2017


Autos: Europe Demand Falls on Selling Day Shift; Underlying Demand Stable (May 2017)

Western European registrations fell 8% yoy in April due to two less selling days (on average) in major markets. Excluding this selling day shift, we estimate underlying demand was up low single digits. UK market led the decline with demand down 20% yoy on lower selling days and prebuy ahead of vehicle tax rate change (beginning April 1). Despite a weaker April, we believe the European market remains strong with improving employment and GDP, along with solid YTD demand growth (+4%).

- Western European registrations fell 8% yoy in April due to two less selling days (on average) in major markets. While growth fell below our Q2 estimate for 2% growth, we believe underlying demand was up low single digits (ex selling days), consistent with the YTD demand +4%. Overall growth declines were led by UK market down 20% yoy due to lower selling days and a prebuy ahead of new registration taxes (beginning April 1). Spain was the only major country that saw growth in the month (+1% yoy), as demand remains strong (+6% YTD, +11% in 2016). All of the other major countries (France, Italy, Germany) declined mid/high single digits given the selling day shift.

- Despite a weaker April due to selling days and the UK tax change (estimated 150bp headwind), we believe the European market remains healthy. With unemployment falling and steady gains in GDP, we continue to expect Europe demand/production to grow low single digits over the next few years.

- April by the numbers:

----- OEMs gaining share: Kia (+6%), Toyota (flat), Fiat (-1%).

----- OEMs losing share: GM and Nissan (-15%), Ford (-14%), VW (-10%).

----- Strongest countries: Netherlands (+6%), Spain (+1%), Austria (-3%).

----- Weakest countries: UK (-20%), Switzerland (-10%), Sweden (-9%).

----- Premium brand deliveries: Mercedes (+4%), BMW (+1%), Audi (-3%).

----- Q1 Electrification Update (4% of total registrations): Battery and Plug-in EVs (+30% yoy), Hybrids (+61%).

- European production declined 9% yoy in April. Production continues to skew toward Eastern Europe, which has seen demand begin to recover in 2017. Year-to-date, Western Europe build is down 1% and Eastern Europe is up 10%.

- German production declined 18% yoy due to three less build days. Given Germany represents roughly 30% of total production, the country accounted for a meaningful portion of the total overall EU production decline. Year-to-date, German production is down 3% yoy. Given demand remains solid (+3% YTD), we continue to believe the German auto market is healthy.

- German diesel sales declined 19% yoy in April, versus total German sales down 8%. Diesel represented 41% of sales in April, flat sequentially, but below full-year 2016 level of 46%.

To download 8-page report, please click here.

Source: BAIRD - GAI




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