EU27 motor vehicle industry defends ground

The automobile industry continued to contribute positively to the economic performance of the EU27 in the first quarter of 2007. According to the ACEA spring Economic Report published today, vehicle production expanded dynamically (+4%), total new registrations increased slightly (+0.3%) and the provisional employment figures showed a 1% improvement, mainly thanks to enhanced automotive investment in the new EU member states.

The first quarter of 2007 showed a dynamic +4% evolution in the production of motor vehicles in the enlarged Europe (5,1 million vehicles). Passenger cars accounted for 87% of the whole production, also increasing by 4% compared with 2006. The first three months of the year were also better for vans and trucks (+2% and +13%, respectively), whereas the production of buses declined by 11%.

Of the total of 4.9 million vehicles registered in the enlarged Europe between January and March 2007, 86% were passenger cars. Soaring new EU Members’ car registrations (+14.9%) contrasted with Western Europe’s slowdown (-1%). In particular, the overall European result was affected by a decline in German new registrations (–10% over three-month period) triggered by anticipated purchases ahead of the January 2007 sales tax increase. Also France (–1.4%) and Spain (–0.7%) saw their markets downsize. On the contrary, the UK (+2.9%) and Italy (+4.3%) remained on an upward path, the latter mainly thanks to the government scrapping incentives introduced at the end of 2006. The share of diesel-powered cars out of total new registrations in Western Europe kept on rising and reached 52.4% at the end of March 2007. The European market for new light commercial vehicles and heavy trucks showed respectively, a 5% and 5.9% upward drift in first quarter 2007 while buses and coaches registrations declined by 5.3%.

European automobile demand in 2007 is likely to remain at virtually the same level as last year. Italian market might well retain its strength thanks to scrapping incentives. France is expected to mildly recover while Spain and the UK will likely slow below the trend. Meanwhile, Germany will bear the consequences of the VAT hike but new car sales should revive in the remainder of 2007 and in 2008 thanks to the introduction of new models and expected tax incentives prior to the implementation of Euro5 emission standards by 2009.

As regards the overall economic situation, European markets slightly enhanced their performance in the first quarter of 2007. Gross domestic product in both the euro zone and the EU27 showed an increase of 0.6% over the previous quarter although it was slightly lower (+3.1% and +3.2%, respectively) compared to the +3.3% and +3.5% growth in the first quarter of 2006. For the year 2007 as a whole, European Commission forecasts euro-area GDP to grow by 2.6% and the EU27 by 2.9%. As regards the main partners of the EU, predictions for US and Japan are somehow lower (+2.2% and +2.3%, respectively). In 2008, although prospects are for a slight deceleration in activity, the 2.7% growth in the EU and 2.5% in the euro area would still be above the 2003-2005 average level of 1.8% and 1.4%, respectively.