Dataforce latest forecast update on the European big-5 markets confirms the Total Market has passed its peak while the continent’s True Fleet Market bears additional growth potential. BMW, Peugeot and Audi are the brands to capitalise on this the most.
Over the last five years, the European car market went through a rapid recovery. With an average Compound Annual Growth Rate (CAGR) of 4.7% between 2013 and 2018, the overall volume growth in the Big-5 markets (France, Germany, Italy, Spain and the UK), accumulated to an impressive 26.0%.
Total Market peak missed pre-crisis level
Still, the total volume of 11.4 million passenger car registrations remained a touch below the pre-crisis peak of 11.7 million that was reached back in the 2005 to 2007 period. Does this mean there is further growth potential, or will the market continue to soften? Dataforce’s approach to this question is to examine the different groups of car buyers, or in other words, the market segments.
Private demand dampened by austerity policy
Regarding private households, tax hikes and social welfare cuts in many countries slowed the recovery of disposable income, leaving their new registrations about 20% below the pre-crisis peak reached in 2006. Moreover, one-off boosts such as heightened replacements in Germany or a favourable exchange rate in the UK will be missing in the future and this will put a temporary end to the private market’s recovery.
In last years, the car industry’s response to the muted private demand was to increase tactical registrations, not only by putting more cars on the dealerships’ and manufacturer courtyards but also strengthening the rent-a-car segment. This has pushed the CAGR to 5.8% for RAC and to 5.7% for Demo compared to just 3.7% in the Private Market.
However, additional costs for emission regulations will reduce margins and thus the leeway for tactical registrations.
Further growth potential in Fleet – except for the UK
This leaves it up to company cars, that make up for almost a quarter (24.2% in 2018) of all passenger car sales in the EU-5 markets. Their average annual growth between 2013 and 2018 was just as high as for demo cars but in their case the vehicles were sold to a customer who is using them every day.
Referring to the outlook on the True Fleet Market, we should differentiate between the UK and the other four countries. Following the Brexit vote, Europe’s largest True Fleet Market’s annual volume will shrink by 160,000 new registrations when compared to the 2016 peak. To put this figure into context: 160,000 new registrations are almost the equivalent of the Dutch True Fleet market.
Then again, the True Fleet Market has further growth potential in the other big markets. Company cars or long-term rental have become an option for a broader range of employees given the “war for talent” and the preference change toward monthly usage fees instead of buying a car.
Brand level winners
So if the True Fleet Market bears the largest growth potential for 2020 which brands do we expect to shine in the EU-5 markets? In terms of absolute growth, we predict BMW, Peugeot and Audi will be the biggest winners while Nissan, Ford and Opel/Vauxhall will suffer from their strong dependency on the British market.
In terms of percentage growth, two brands, Tesla and DS are to double their True Fleet Market sales and they are followed by Lexus who we expect to expand their European fleet business substantially.
About Dataforce Forecasts:
Dataforce has been providing the automotive industry with channel-specific forecasts since 2010. Examined market segments are Private, True Fleets, Rent-A-Car and Dealerships/Manufacturer. Forecasts cover the 7 largest fleet markets (Belgium, France, Germany, Italy, Netherlands, Spain, United Kingdom) as well as makes and models and are updated quarterly. Please find additional information on https://www.dataforce.de/forecast/ or contact Melissa Mateus Alarcon, +49 69 95930-352.