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02/07/2012
NO ONE IS SPARED

THE CAR MARKET

The downturn in registrations during the first four months of 2012 has once again confirmed the new dimension of the car market at national and European level. A situation that all players in the sector must reckon with

Renzo Dotti

WHEN COMMENTS ARE MADE FOR SEVERAL MONTHS in succession about the negative figures in a certain sector, the risk is that new roads will be ventured along in an attempt to explain such overwhelmingly depressed trends. I cannot deny the feeling that swept over me when I first saw ANFIA’s Excel tables of cold figures for vehicle registrations in Italy and Europe for the first four months of 2012.

What flashed through my mind at the sight of so many minus signs, which had spared no one, not even the strongest and most “virtuous” makes, was an approach that went beyond the classic justification of economic recession and associated the downturn with a different way of perceiving mobility, a new vision of the car as a means of transport in the “strictest sense”, the car of the future.

It lasted only a few minutes, then logic prevailed and led me towards the obvious but also, in my opinion, sensible conclusion that the number of cars being sold continues to decline mainly because there isn’t much money around and, above all, little hope that the economic situation will improve. There’s more.

I do not use, and will try not to use, the expression “few cars”, especially when I reflect on the fact that, at national level, the two million and more vehicles registered in the years of government incentives probably represented “many cars” for a market like ours.  Comparing now with then would certainly make us shudder, at least when looking at the cold figures, but not forget what is behind it.

 

A two-figure decline in Italy

The collapse was expected and it came.

In April, registrations in the Italian car market totalled 129,663, a downturn of 18% compared to the same month in 2011, which had a total of 158,113. The crisis picture is even harsher if we consider that the 18% includes registrations “recouped” from March, when the transporters’ strike literally paralyzed the sector.

Registrations from the beginning of the year total 537,170 against 672,872 in the first quarter of 2011 (-20.2%) and the expectations of the “Forecasts & Market” Observatory set up by the UNRAE statistics centre confirm the tendency of the first four months with a forecast 1,434,000 new car registrations in Italy in 2012.

The analysis goes further and assesses that reduced mobility, the probable greater reduction of cars and, as a consequence, a smaller number of vehicles in circulation, could mean that 2012 will be remembered as the first year since the start of the mass diffusion of cars that we witnessed a process of  “de-motorization”. Sales to families will be the most affected. The economic crisis and the consequent substantial reduction in savings and available income will determine a downturn in domestic consumption and, in particular, in car buying.

The UNRAE statistics centre estimates that by the end of the year registrations by individuals will number just over 900,000, a share close to 63%. As a consequence, leasing will grow compared to 2011, but the number of vehicles will only be around 250,000, not enough to ensure the renewal of company fleets in the customary timescales which will, therefore, tend to be longer.

 

A chronically weak European market 

Although there can be no doubt about the drastic downturn in the Italian car market, the situation at European level is certainly not any better.

According to data for all European Union and EFTA countries published by ACEA, the association of European car manufacturers, the car market on the continent closed April at -6.5% with 1,058,348 registrations.

In the first quarter of 2012, registrations totalled 4,487,798, a downturn of 7.1% against the same period last year. If we examine the situation in each of the main countries, Germany, with 274,066 registrations in April (+2.9%) and 1,047,702 registrations in the first quarter of 2012 (+1.8%), has been confirmed also in this sector as the only driving force behind Europe. Less reassuring news comes from the other side of Alps. During the first quarter the French market had 674,382 registrations against 817,211 in the first quarter of 2011, a decline of 17.5%.

Sales of petrol vehicles fell by 8.1% in the month, a 23.3%  share of total registrations, but diesel vehicles remained stable with 74.9% penetration, which was especially thanks to short-term leasing, the growth of which compensated for the downturn in private sales. In April, sales of hybrid vehicles increased (+39.3%), representing 1% of total registrations, and sales of LPG vehicles also recovered after the strong falloff at the beginning of the year.

The Spanish market’s two-figure downturn in April brought the total number of registrations at the beginning of the year to 260,369 (-7%), the same levels recorded in 1993. The turnout at dealerships fell by over 10% in the month, an indication that May will also be a critical month for the market. With the current state of the economy, it is expected that the year will close with less than 780,000 registrations (-3.5%). Lastly, the British market closed April with higher than expected figures – the fourth consecutive month of growth –  of 142,322 registrations (+3.3%). The numbers are 18% lower than in April 2007, but 15% higher than in April 2009. In the first quarter, the market grew by 1.4% with 705,878 registrations.

 

Requests from the market 

The current sales trends at national level (but the same can be said for all European countries) will have the inevitable repercussions for the entire automotive supply chain from production to distribution. 

At a time of recession – with GDP dropping by 0.8% in the first quarter of 2012 compared with the previous quarter and by 1.3% compared with the first quarter of 2011 –  demand is negatively influenced by credit squeezing, which damages consumer spending and the ability of companies, SMEs in particular, to invest, by rising petrol prices, and fiscal pressure at the limits of sustainability. This is why all the players in the market are attempting through their relevant associations to define remedies for a situation that is in danger of costing us dearly, also in terms of employment. 

According to ANFIA, as a matter of urgency in the interests of equity and the growth of the sector, the Government must redress the fiscal measures introduced to the detriment of cars – the running costs of which have been growing out of all proportion for many years and are unsustainable at this time of recession – and the entire automotive supply chain. These measures include the so-called “superbollo”, additional road tax,  which negatively affects sales in the premium segment – the feather in Italian industry’s cap – and is in danger of having the opposite effect to that intended; in other words, a drop in car sales equals a drop in income from taxes.

The other road is the one taken by Federauto, the association that represents the dealerships of all makes sold in Italy. In addition to appealing to the Government (which, in the person of the Minister for Economic Development, Corrado Passera, repeated several times that it is not considering specific incentives for cars or for various industrial sectors) to pay more attention to a sector that contributes 16.6% to domestic fiscal income and employs 1,200,000 people in spin-off industries, it also requested that its relationship with car manufacturers should be renegotiated directly with the latter in the certainty that dealerships cannot survive the crisis on their own. However, the value of these demands must be in line with a situation of recession that, according to the latest estimates, will not improve, in Italy at least, until 2014. Two years that can really change many things for everyone.


• A countertrend in Natural Gas Vehicles 

The increase in petrol prices, due not only to new state and regional taxes, but also to obvious attempts at speculation, has more than a little affected the sale of new vehicles in Italy.

In the first four months of the year, total car registrations fell by 20.2%, but those for natural gas vehicles increased by 51.7%. The reason for this really astonishing result is the low cost of natural gas, added to which it is also environmentally friendly. By taking the average price at the pump in recent months, Promotor’s statistics centre calculated that the cost per kilometre for a mid-size vehicle running on natural gas is 6.45 eurocents, for LPG it increases to 11.49 eurocents, for diesel it’s 14.93 eurocents and for petrol it’s about 18.18 eurocents. So the cost of fuel for a natural gas vehicle is just over a third of that for the same car running on petrol.


• Used cars are also marking time 

News that isn’t particularly good for the sector, but an extremely important indication of the real economic situation in our country, comes from the used car market. In fact April was a black month with a downturn of 18.94% in gross income, including the temporary transfers and part exchanges that dealerships offer end-customers. In April 2012 there were 327,386 transfers of ownership, 76,513 fewer than the 403,899 of the same month in 2011. For the first four months of 2012, the total falloff in the used car market was 12.21%, with 1,408,227 transfers, 195,869 fewer than in January to April 2011. 

The biggest downturn was recorded by BMW with a loss of 31%. It was followed by Alfa Romeo (-29%) and Ford (-24%). For the other twelve manufacturers included in the analysis, the average falloff was 17%. The make with the most transfers of ownership was still Fiat, with 26%, followed by Volkswagen and Ford with 6%. Italians are now being careful about all types of purchases and, just like new cars, used cars have also suffered from the general climate of uncertainty.

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