Global Insight Perspective | |
Significance | European commercial vehicle sales were hit by soaring fuel costs and the loss of a working day in May, according to ACEA. |
Implications | Overall, commercial vehicle sales across all classifications remain buoyant in the region, although the dominant LCV segment is underpinned by the newer EU member states and Germany and France. |
Outlook | The economic pressures being felt by consumers have largely been avoided by businesses in Europe thus far; however, given the region’s heavy dependency on road freight to ship all manner of goods, the rising fuel prices will only serve to lift inflation further, just as many countries are suffering an economic slowdown. The combination of these factors and others paints a bleak picture heading into the second half of 2008. |
According to trade body ACEA, new commercial vehicle sales of all classifications across Europe fell by 5.6% year-on-year (y/y) to 227,415 units in May, with the loss of one working day compared to May 2007 in most countries across the region exacerbating the effects of the economic headwinds being experienced in many of the markets. For the first five months of 2008, however, registrations were up 1.3% y/y at 1,170,339 units for the European Union (EU) plus the European Free Trade Association (EFTA—Iceland, Liechtenstein, Norway, and Switzerland), buoyed in particular by the newer EU states.
Light commercial vehicle (LCV) sales in May fell 5.6% y/y to 185,400 units, as Spain, Portugal, Ireland, and Denmark all suffered dramatic falls (of 34%, 20.8%, 38.2%, and 31.3%, respectively). The key markets of France and Germany were among the four markets posting growth in this sector (of 10.8% and 2.9%, respectively), together with the Netherlands (up 9.7%) and Austria (up 3.0%). Overall, however, LCV registrations in Western Europe fell by 7.1% y/y in May as the loss of one working day compared to May 2007 and the general economic headwinds affecting the region combined with soaring fuel costs to dampen consumer activity. The downturn, however, did not affect the markets in the newer EU member states as LCV sales there rose 9.9% y/y. For the year to date (YTD), LCV sales are more stable, down just 0.4% y/y across the EU-27 plus EFTA, and down just 0.2% across the EU. However, Western European LCV sales are now down 2.5% y/y at 855, 804 units.
Sales of heavy commercial vehicles (HCVs)—those over 16 tonnes, excluding buses and coaches—fell by 5.7% y/y to 27,366 units in May across the EU-27 plus EFTA. However, total European demand for new heavy trucks rose by 10.4% y/y in the YTD to 146,515 units. Western Europe registered 22,644 HCVs in May, down 3.3% y/y, despite strong growth in the U.K., French and Italian markets, of 13.9% y/y, 10.5% y/y, and 3.5% y/y, respectively, but HCV registrations are up 12% y/y in the YTD.
Registrations of commercial vehicles over 3.5 tonnes (medium duty, excluding buses and coaches), or trucks, fell 6.9% y/y to 38,097 units in May for all of Europe. Again, the results for the YTD are much more positive, showing an 8.7% y/y increase in registrations to 197,928 units for the whole of Europe. Western European truck registrations were down 1.9% y/y in May at 32,178 units and up 10.1% y/y for the YTD at 168,185 units.
Buses and coaches were the only category that registered an increase in May, of 7.6% y/y, while their YTD sales surged 24.1% y/y to 20,532 units.
Outlook and Implications
The loss of one working day in May combined with the economic headwinds being felt across many markets in the region to dampen European commercial sales across the board. However, for the YTD, the commercial vehicle market is faring better than the consumer-dominated car market as the halfway point of 2008 approaches, and it is actually ahead of last year on a YTD basis.
The dominant volume LCV segment remains buoyant thanks to the growth in the key markets of France and Germany (the two markets combined accounting for a third of LCV sales in the Western European region), coupled with decent performances in both Italy and the United Kingdom (in contrast to their car markets). This underlines the fact that businesses across the region are not feeling the adverse economic effects quite as hard as consumers yet, while sales are also being boosted by new model activity as a number of new LCVs enter the market.
In the heavy commercial vehicle sectors, sales continue to be strong as demand for goods and commodities remains healthy; however, the impact of the soaring cost of fuel has yet to ripple through to sales. During May, across many markets in Europe independent drivers and hauliers’ associations staged protests over the cost of diesel in the region, with strikes, “go-slows”, and other protests crippling many parts of certain countries. The surge in fuel costs is already affecting food prices in the region, and the ripple-down effect has hardly started in other industries.
Given that Europe is heavily dependent on road freight to ship all manner of goods, the rising fuel prices will only serve to boost inflation, just as many countries are suffering an economic slowdown, and this may force the hand of the European Central Bank (ECB) to raise interest rates, something that would further depress growth of the market. The combination of these factors and others paints a bleak picture heading into the second half of 2008.