[Excerpt]
Commercial vehicle (CV) demand growth in the European Union
remained on a positive track during April, according to the latest
data published by the European Automobile Manufacturers'
Association (ACEA). The number of light commercial vehicles (LCVs)
under 3.5 tonnes, medium and heavy commercial vehicles (MHCVs), and
medium and heavy buses and coaches over 3.5 tonnes registered grew
by 7.8% year on year (y/y) to 215,497 units. Thanks to growth in
earlier months, registrations in the year to date (YTD) are now up
by 5.8% y/y to 871,100 units.
The European Free Trade Agreement (EFTA) region - which
comprises Iceland, Norway, and Switzerland - also saw growth in CV
registrations in April, which increased 3.2% y/y to 7,808 units. In
the YTD in this region, CV registrations now stand at 28,318 units,
an increase of 4.8% y/y.
The LCV category, which again made up over 80% of CV demand in
the EU last month, provided strong support to CV registrations as
it gained by 8.4% y/y to 176,643 units. All the five largest
markets in the region contributed to this gain, with most outpacing
the whole region. France led the way with 43,485 units registered,
an improvement of 12.4% y/y. Another market where strong growth was
recorded is Italy, where registrations leapt by 15.6% y/y to 15,100
units, while Spain saw a relatively modest increase of 7.8% y/y to
20,315 units. The United Kingdom saw an increase of just 4.7% y/y
to 24,604 units, although this is a positive performance,
particularly given some of the current stresses facing the
market.
Outside this group, there were some good performances from
countries such as Belgium, Croatia, Hungary, Lithuania, and Poland.
However, the market was also not without some weaknesses either.
One of the biggest was in Sweden, which recorded a decline of 15.4%
y/y, which is still likely to be down to the introduction of a new
bonus-malus CO2-based taxation system for new registrations on 1
July 2018, which led to a huge pull-forward in registrations. This
has had a considerable impact for this type of vehicle as virtually
none of them is eligible for the ultra-low emission incentives. It
may also be down to a string of strong annual gains boosting the
market. Alongside this market with notable declines were Estonia
and Finland.
As a result of the gains in April, LCV registrations in the YTD
are now up by 5.9% y/y to 721,303 units.
Growth in registrations in the MHCV category of vehicles with a
gross vehicle weight (GVW) of over 3.5 tonnes in the EU in April
was 5.8% y/y, with volumes of 35,484 units. This growth has taken
these registrations in the YTD to 136,575 units, an increase of
6.1% y/y. Furthermore, registrations of HCVs with a GVW of over 16
tonnes gained 5.6% y/y to 28,911 units, which helped registrations
reach 111,230 units in the YTD, up 4.9% y/y. The leading market in
the MHCV category during the month, Germany, put in a solid growth
performance in April, as registrations increased 4.7% y/y to 9,058
units. The MHCV category was also boosted by increases in France
(17.7% y/y), the United Kingdom (10.3% y/y), Netherlands (14.2%
y/y), and Poland (4.1% y/y). However, Italy was down by 7.4% y/y
and Spain retreated by 15% y/y.
Outlook and implications
Better-than-expected economic growth in Europe so far this year
has translated into strong demand for MHCVs during April and in the
YTD, according to Ewa Root, manager of IHS Markit's Global Truck
Sales Service. Furthermore, with improving exports and strong
retails sales, demand for heavy tractor trucks grew, while sales of
heavy rigid trucks maintained the strong upward trajectory that
began in 2018 and medium-segment sales improved as well.
Nonetheless, the seasonally adjusted annual rate (SAAR) of sales
shows that the pace of growth was below its cyclical peak in April.
This has been already visible in a few countries, such as Italy and
Spain, where demand growth is negative this year. Taking into
account the rising economic risks, including Brexit negotiations,
as well as a slowing pace of truck replacement demand in the EU,
IHS Markit maintains that sales of heavy trucks will weaken in the
EU this year. However, given the latest results, we may be slightly
increasing our forecast in our next report.
As for the LCV category, the situation is similar from an
economic perspective. This category could also see some influence
on registrations in the coming months from the planned introduction
of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) and
real driving emission (RDE) certification during September 2019 for
existing vehicles. However, lessons are also likely to have been
learned from the struggles that some automakers had last year when
transitioning passenger car models to meet the same regulations,
which subsequently led to the restricted supply of some popular
models in the weeks and months after their introduction. Indeed,
automakers have already announced that their vehicles are on course
to meet this year's deadline. For the full year 2019, IHS Markit
anticipates that registrations of LCVs with a GVW of up to 6 tonnes
will dip by 2% y/y to 2.12 million units in the EU. We also
anticipate a further decline during 2020, before registrations
start to rebound slowly during 2021.
