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European Car Sales Accelerate, But Clouds Gather For 2nd Half

European Car Sales Accelerate, But Clouds Gather For 2nd Half.

LMC Automotive Cuts 2016 Sales Forecast Back To 5.5 Per Cent Growth.

“We aren’t necessarily pointing to a depressed 2017 – there is still lots of pent up demand – but the pace is definitely expected to be altered”

    Auto sales in Europe, which gathered speed in the first half, look set to slow a bit in the second half with prospects now clouded after the U.K.’s Brexit vote.

    European Union car sales in June rose 6.9 per cent to 1.46 million, bringing the total for the first half to 7.8 million, a gain of 9.4 per cent, according to ACEA data.

    IHS Automotive said it had already predicted a slowdown in the second half of 2016.

   IHS Automotive analyst Carlos Da Silva said the Brexit vote, the shorthand term for Britain’s vote to leave the E.U., had no direct impact on first half sales but will eventually become a factor.

    “We remain relatively confident that this event will not massively alter the course of the European market during 2016. The key reason is because the date refers to registrations, which means that when talking about June registrations we are in fact talking of customer decisions that were taken, on average, three months earlier, as most cars in Europe are built to order rather than purchased from inventory stocks. This means that Brexit, a late June event, cannot reasonably affect registrations before September, and that any change of  trend before that – except maybe in the U.K. itself, could not be directly and completely linked to the referendum result,” Da Silva said.

    The referendum took place June 23.

    No dramatic change
    “We are not dramatically changing our views for the European market as a whole in 2016, as we were already factoring in a relative slowdown for the second half anyway. However a more visible negative impact is expected during 2017 and 2018, when registrations actually translate customers’ decisions that will have been taken post-Brexit,” Da Silva said.

    LMC Automotive, in its first half report on Western Europe’s car sales, cut its forecast for 2016 to a gain of 5.5 per cent to 13.91 million vehicles. The previous month’s forecast was 6.3 per cent growth, slightly up on April’s 6.0 per cent for the year.    

    “Under our new base case forecast, we do not assume the U.K.’s leave vote will fuel an E.U. economic downturn. However, heightened uncertainty about the future political (especially with more countries likely to bring into question their own E.U. membership) and economic landscape in Europe could have a meaningful impact on business confidence and market sentiment. A more negative scenario for Europe as whole is, therefore, plausible,” LMC Automotive analyst Jonathon Poskitt said.    

    IHS Automotive’s Da Silva said the lack of a precise Brexit roadmap means it is hard to be specific about the outcome.

    Brexit blow
    “The Brexit decision is a blow to the region and will affect each and every macro indicator we are tracking. As tensions and uncertainty rise, we do not see how the European market could sustain its current momentum beyond 2016. We are not necessarily pointing to a depressed market in 2017 – there is still lots of pent up demand out there – but the pace is definitely expected to be altered in the years to come,” Da Silva said.

    Meanwhile Evercore ISI pointed out that Europe’s biggest market, Germany, will be playing a solid anchor role.

    “German will play a key role in keeping European auto sales on track over the second half of the year and in 2017. We forecast the market to grow 4.0 per cent this year before plateauing next year at about 3.4 million,” Evercore ISI said.

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