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08/11/2016
CONFIDENCE AND INVESTMENTS

Automotive Market

 

The National car market’s growing trend records the 27th consecutive positive month despite worrying signs coming from the economy as a whole  

Renzo Dotti

When can growth be considered structural? The excellent performance of the Italian car market seems to suggest that the industry is well on track to consolidate a trend that scored positive signs for the twenty-seventh consecutive month. Last August figures were particularly significant (71,756 new registrations, a 20.1% increase over the same month in 2015) and in general all the first 8 months of 2016, with 1,251,806 new units sold, marked a 17.4% increase compared to the volumes of the same period last year. In short, enough to change the mind of even the most skeptical analyst, looking at a growth that seems to know no obstacles. But, as we all know, not all that glitters is gold.

 

Between satisfaction and concern

Despite a slight decline in July, still positive but certainly not exciting, the Italian car market found new impetus with sales volumes similar to August 2009 when more than 85,000 new registrations were recorded. Such positive results have certainly been favored by a positive calendar (22 working days in August 2016 compared to the 21 in 2015) and a strong general desire to replace old cars after years of procrastination. During the whole of 2016, as well as the two previous years, purchasing new vehicles was further facilitated by a lower cost of borrowing, a greater access to credit, lower fuel prices and tempting offers by the manufacturers. All this, of course, has been taking place in a general climate of trust which remained high for several months, and has convinced many private owners and not only, that it was a good time to replace their cars, thus taking a decision that had been postponed for several years. The coming months, however, are expected to show a general slump in the growth rates, due to a lower consumer and business confidence index, and a persistent economic stagnation. Significant in this regard the Istat economic sentiment indicator related to the business confidence index which has fallen below 100 for the first time since February 2015. A warning signal that should not be underestimated.

 

Proposals to support the industry’s growth

No need to mince words. Both manufacturers and the association that represent them know full well that: as the current economic conditions persist, confirmed by recent data on the lower than expected GDP, a structural growth of the market, without an extension of the current tax support program on investments, must be considered impossible. We are specifically looking at the super amortization norm introduced in the 2016 Stability Law, which proved very effective in stimulating a renewal of both corporate and rental fleets, which grew by 22% and 30% respectively last August. Furthermore, many insiders claim that the time is right for an “eco-friendly” tax reform, following the example of the 20 out of 28 EU Member States that have already moved in that direction, with dedicated taxations centered on CO2 emissions, promoting “greener” vehicles in place of the more polluting models still on our roads. Among the several proposals, a reduced taxation for alternative fuels (including bio-fuels) certainly deserve a mention, along with the expansion of the distribution network, with more CNG and LNG filling stations and streamlined procedures for legal authorizations and permits. Finally, specific support programs aimed at promoting a greater distribution of alternative vehicles which use “cleaner” fuels and guarantee less harmful emissions.   

 

Sustainable consumption

A number of initiatives could contribute to steer the entire sector towards standards of sustainable transport. One of these relates to restructuring a vehicle’s running costs based on a “pay-as-you-drive” system, a feasible solution thanks to data communication technology, and one that is fast spreading in our Country, resulting in a progressive reduction of insurance costs as well as road accident scams. Automotive associations and other sector specialists hope for a steady development of IT systems applied to the whole industry which should, along with a necessary tax reform, facilitate the creation of a sustainable mobility plan by the Government, promoting a wider use of eco-friendly vehicles and the development of high-connectivity technologies. This will produce radical changes to the types of cars running on our roads, securing a cleaner environment along with a meaningful rise in car sales.

 

Alternative fuel sales plummeting

Who would have thought! Up to not long ago, LGP and CNG powered cars, the so called alternative vehicles, made up the fastest growing segment in the industry, even when the car market was going through its roughest patch, pushed by their lower running costs. But now the wind has changed and, while more traditional vehicles (petrol, diesel and hybrid) seem to have overcome the recession growing  at remarkable pace, LGP and CNG powered cars suffered the blow. The recent drop in the oil price has encouraged many to choose a more traditional, or in some cases, a hybrid vehicle. During the January-August 2016 period sales dropped by 20% for LGP cars and 28% for CNG powered vehicles, greatly reducing their market share gone from 8,2% in 2015 to 5,5% in the first 8 months of 2016 for LPG, and from 4,1% in 2015 to 2,5% this year for CNG powered vehicles.

 

 

Booming commercial vehicle sales!

After 31 months of consecutive growth, the commercial vehicle market experienced a further acceleration in August with a staggering + 118.4% compared to the same month in 2015. According to estimates published by UNRAE’s Centre for Studies and Statistics, 12,239 new vehicles were sold in August 2016 compared to the 5,645 units recorded the previous year. The aggregate for the first eight months of 2016 scored a significant 39,6% increase over the same period last year (114,185 units compared to 81,772). Great numbers indeed, but facilitated by the deadline, in early September, of the allotted funds coming from the Sabatini Law (expired on September 3) and by the super amortization norm which resulted in a strong purchasing incentive.

 

 

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