Political Turmoil May Undermine 2017 European Car Sales

Political Turmoil May Undermine 2017 European Car Sales.

“In 2017, new vehicle sales in Europe will experience a sharp deceleration

Western Europe’s car markets will turn anaemic next year, as possible political turmoil frightens consumers way from committing to big money purchasers.

And there will be many attractive new cars and SUVs going on sale in the first half of 2017, including the crucial BMW 5 Series, and many more SUVs like the Skoda Kodiaq and Alfa Romeo Stelvio. Suzuki has invented a new mini-SUV sector with the cute little Ignis.

But manufacturers will have to fight off economic uncertainty spurred on by Britain’s decision to leave the European Union (Brexit) and tax increases won’t help either, according to Britain’s BMI Research, likely bringing 4 years of strong growth to an end.

Investment researcher Evercore ISI believes sales will stagnate next year in all of Europe, and forecasts sales of 15 million. Western Europe includes all the big markets like Germany, France, Britain, Italy and France.

The University of Duisberg-Essen’s Center for Automotive Research (CAR) believes Europe’s sales growth will slow to 1.3% next year,  compared with 2016’s healthy 5.8% pace.

Citi Research forecasts further sales growth in 2017, but not much.

Barclays Equity Research sees sales in Europe rising 1.5%, but worries about “heightened political uncertainty across Europe”.

There is a general election in the Netherlands in March, Presidential ones in France in April and May, while Germany’s Chancellor Angela Merkel faces the voters in September. These potential political landmines are making investors worry that radical winners might be the final straw in the demise of the euro single currency. Collapse of the euro might mean Germany having to resume use of the old Deutsch Mark. That would create havoc with the bottom lines at carmakers like BMW, Mercedes and Volkswagen.

Slow dramatically

BMI Research predicts sales growth in Western Europe will slow dramatically, but will remain strong in the less important eastern markets.

“In 2017, new vehicle sales in Europe will experience a sharp deceleration to 2.0%, a sharp contrast to the continuous accelerations in vehicle sales growth experienced over the previous four years. While Europe’s sales in 2016 were built on solid macroeconomic foundations, these have begun to weaken slightly going into 2017, while at the same time key markets in the region have been hit by autos sector-specific shocks that are souring the prospects for sales growth,” BMI said.

Western Europe, which accounts for 79% of the region’s sales, will see sales growth slow to 1.4% in 2017, from about 6.8% this year, according to BMI.

“The strongest drag on vehicle sales will come from the U.K., Spain and Portugal as their markets dip into decline due to country-specific factors. Furthermore, while the German market continues to grow at a steady pace, other key markets such as France and Italy will see their growth decelerate sharply,” BMI said.

In an earlier report Berenberg Bank was even more downbeat, expecting a European decline of up to 4%.

“The state of the European market is far weaker than headline growth figures would suggest. Strong growth is driven by increased household leverage, strong fleet development and government incentives. However, these factors just pulled forward demand as structural challenges like population growth or car ownership remain in place.”

   “We expect the European market to decline 2 per cent and 4 per cent in 2017 and 2018,” Berenberg Bank said.