Pent-Up Demand Buoys Car Sales Growth
Passenger car sales in France increased 2.9% year-on-year (y-o-y) in the first three months of 2014, to 446,648 units. BMI forecasts 2.0% growth in passenger car sales in 2014, as we expect pent-up demand following several years of declines and low base effects from 2013 to boost the market over the course of the year.
As the graph shows, March represented a sharp uptick due to low base effects and pent-up demand, with sales registering 8.5% y-o-y growth, but the market had been weak in the preceding two months of the year. We attribute this mostly lacklustre market performance to the country's ongoing weak consumer outlook. Indeed, we do not expect to see a recovery in the country's consumer story in 2014, despite our expectation for an upswing in car sales. Rising unemployment, low consumer confidence, and stagnant real wage growth will keep private consumption in the country subdued throughout 2014 ( see 'Lagging Behind The Eurozone Recovery', January 10).
|March Uptick As BMI View Playing Out|
|France Monthly Passenger Car Sales (LHS) And Historical Data And Forecasts (RHS), Units|
We caution that risks to our passenger car sales forecast remain firmly to the downside as weak consumer sentiment could impact the sector more than we currently envisage. Indeed, the weak consumer story weighed on passenger car sales in 2013, causing sales to contract 5.7% over the year. However, we believe that low base effects from 2012 and pent-up demand in the market tempered the rate of decline somewhat.
The French passenger car market reached its peak of roughly 2.3mn units in 2009 and has declined since then ( see graph) on the back of weak consumer sentiment in the country. We believe that pent-up demand from these years of contraction will help drive increases in the segment over the remainder of our 2014-2018 forecast period, with growth averaging 3% per year, although we do not expect the market to surpass its peak during this time, reaching some 2mn units by 2018.