European Car Sales Growth Will Stumble In 2018.
“We believe near-term prospects for most look reasonably solid. We believe The Show Can Go On.”
European car sales growth will slow this year but still remain in the plus column.
Investors will be looking out for radical action, like the possible flotation of some Fiat Chrysler Automobiles subsidiaries while the really hopeful will be betting on Volkswagen and Daimler unlocking value for them with the flotation of the likes of Audi and Porsche, or Mercedes trucks. Diesel’s decline will gather momentum.
New models like the BMW 3 series and Audi A6 saloons, Jaguar E-Pace and Volvo XC40 compact SUVs, and the Ford Focus family car will excite buyers, while the onward march of electric vehicles might turn into a stroll.
Most analysts expect a small slowdown in the growth of sales next year, ranging from investment bank Nord LB’s 4 per cent gain to just under 1 per cent from LMC Automotive.
BMI Research also expects a relatively healthy 2018.
“In the all-important Western Europe sub-region, which accounts for 79 per cent of European vehicle sales, growth will decelerate in 2018 to 3.7 per cent compared with an estimated 4.3 per cent in 2017,” BMI Research said in a report.
“However, we believe that the positive mix of benign inflation rates and rising employment in major economies in Western Europe will continue to provide major support to growth in auto sales,” BMI said.
Sales in Britain will decline though, it said.
Citi Research said 2018 will a year of sales growth in Europe, no bad thing given this would be the 9th positive year after the financial crash. Worries that Europe will slip into recession seem unfounded.
Real incomes rising
“We still see some potential for volume growth in Europe in 2018, but the big drivers of volumes will be emerging markets. We are confident the (economic) cycle is not about to roll-over – unemployment is low, global GDP is synchronising and real incomes are rising – but at the same time we acknowledge growth is slowing,” Citi Research analyst Michael Tyndall said.
Tyndall said autos made gains against other sectors in 2017 as investors became less worried about the huge costs of new technology, and excited about the possibility FCA, Daimler and VW might indulge in unlocking investor value.
“It is interesting that FCA, Daimler and VW are the best performing European (manufacturers) over the last 3 months and they are also the most likely candidates for some level of unlock. The issue for us is timing. FCA might well act in 2018, but we would argue that this is expected, whereas for the other two names we think it is a more a long-date prospect,” Tyndall said.
At the lower end of estimates with 0.8 per cent growth expected for 2018, LMC agrees Britain will be a drag on the market. But fears that Britain’s exit from the European Union will end up in chaos seem to have relented a bit.
Professor Ferdinand Dudenhoeffer from the Center for Automotive Research (CAR) at the University of Duisberg-Essen in Germany said new products will help demand in 2018, although falling diesel sales will be a problem.
Notable new models
CAR lists the likely notable new models in 2018, or order of appearance as the Jaguar E-Pace in January, Volvo XC 40 in March, Peugeot 508 (May), Mercedes A class (May), VW Touareg (July), Audi A6 (July), Ford Focus (September) and BMW 3 Series (October).
The first rivals to the Tesla Model S and Model X appear in 2018, with the long-range all-electric Jaguar I-Pace and Audi e-tron.
Bernstein Research analyst Max Warburton declared himself happy with 2017 and hopeful about 2018.
“Car sales grew almost everywhere. Mix improved. Pricing held up. Concerns about credit, residuals and diesel were largely overcome. Almost every company beat forecasts. Tesla tripped up. Post Frankfurt (car show), it became evident that the ‘incumbent’ companies were intent on being competitive in the electrification race. The sector has outperformed in 2017. Pleasing,” Warburton said in a report.
“We believe near-term prospects for most (manufacturers) and suppliers within our coverage look reasonably solid. We believe The Show Can Go On. 2018 will be another year of earnings growth for this sector,” Warburton said.
One big question mark in Germany for 2018, is the possibility various regional cities might impose bans on diesel vehicles, by-passing the federal government and invoking local courts.