Top Margin Menu

VW Hardest Hit As Car Makers Spooked By WLTP

VW Hardest Hit As Car Makers Spooked By WLTP.

“We would expect the trend to reverse once all model variants have been successfully homologated and the pricing environment normalizes”

Western Europe’s car sales dived more than 20% in September, after the previous month’s almost 30% spike, as carmakers were penalized for missing the deadline for new European Union rules on fuel economy.

Worst hit was Volkswagen Group, where sales fell 50%. Other sufferers within the VW family included Audi, off 60.8%, Porsche, down 67.3%, and the VW brand minus 52.3%, data from the European Car Manufacturers Association showed. The association is known by its French acronym ACEA. Renault, off 32.5%, FCA’s Alfa Romeo, down 59.9% and Nissan off 42.9%, were among the worst hit.

Sales in August were boosted by carmakers offloading models that would have failed the new rules. Sales in September reflected manufacturers’ inability to make enough cars and SUVs to meet the new regime.

The sales roller-coaster is expected to even itself out by the year.

In August, car sales in Western Europe spiked almost 27% to an all-time annual rate high of 18.4 million, from 14.7 million in July, according to LMC Automotive.

In September came the payback as sales dropped 23% to an annual rate of 11.3 million, according to LMC Automotive.

The new rules – Worldwide Harmonized Light Vehicle Test Procedure or WLTP – were intended to force automakers to be more honest about the fuel consumption of their vehicles.

Temporary damage
This has temporarily damaged European carmakers’ bottom lines, said Fitch Ratings.

“This is due to significant one-off costs to certify vehicles under the new procedure, heavy discounting to liquidate stocks of vehicles that would not be certified on time and
manufacturing stoppages ahead of the deadline to avoid assembling uncertified vehicles. This in turn
led to under-absorption of fixed costs in 1H18,” Fitch said.

“However, the impact on sales and profits is likely to be temporary,” Fitch said.

LMC Automotive has revised down its forecast, which sees the overall Western European 2018 sales forecast growth nudge down to 1.4%, compared with its month earlier prediction of a 1.5% gain.

“Following growth of 1.4% in 2018, we see 2019 growth at 0.8%, as several key markets approach their cyclical peaks,” LMC Automotive said.

Western Europe includes all the big markets like Germany, France, Britain, Spain and Italy.

Citi Research said Volkswagen has been hurt the most by the disruption, and it will cost it €1 billion ($1.2 billion) in lost profits in the second half. Renault and Fiat have also been hit badly, but the market will return to normal soon.

Supply issues
“Given that the fall in (sales) has been caused by supply issues, we would expect the trend to reverse once all model variants have been successfully homologated and the pricing environment normalizes. Although VW suggested the impact of WLTP might be seen in 1Q19 numbers, so far they are the only (manufacturer) to suggest this and the consensus is that the disruption should be isolated to the second half of 2018,” Citi Research analyst Raghav Gupta-Chaudhary said.

Investment Researcher Evercore ISI said that when the dust settles, it expects European Union wide sales to show a close to 3% gain for the year. 


 

Print Friendly, PDF & Email

,

No comments yet.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

  • Newsletter

    Sign up for the mailing list - industry analysis and honest car reviews

  • Site Designed and Administered By Paul Cox Photographic