ExpertEye European Automotive Report Q3 2016 | Page 27

England’ s 2 % target. The negative impact on domestic demand may yet outweigh the benefits of increased exports and as such 2018 is more likely to grow at a similar rate to 2017. Of course the great unknown remains the results of the French and German general elections, the Italian referendum and the rise in protectionist and nationalistic attitudes. Should a Trump style backlash happen in any of these then we may see a far more accommodating EU resulting in a boost for all.

The strong pound has made the UK a cheap place for OEMs to offer high discounts whilst retaining reasonable non-sterling bottom lines. This has meant the UK has been awash with heavily subsidised finance deals on new cars as well as a significant number of pre-registrations and dealer demonstrators. However with the sterling fall we are now seeing a downturn in sales as OEMs look for cheaper discounted sales in the euro zone. Car sales grew by just 1.4 % in October and by the end of the year the UK is likely to be ony around 2.5 % above 2015 levels. Going forward the current round of OEM budget setting for 2017 is likely to be factoring in sales decline in 2017, excluding any growth driven by new product introduction. With the weak pound and other econmic factors new car sales look likely to drop by 4.2 % next year and a further 5.1 % in 2018 although this still leaves sales of around 2.5 million. CV sales are following the slowdown in growth seen in car sales, dropping 6.4 % in October with a full year forecast of around 2 % growth over 2015.

Whilst RVs rose this quarter some of this was a typical market realignment to heavy drops earlier in the year. Our overall view is still for a 2pps drop over the next twelve months. But the UK typical volatility and Brexit uncertainty means a short term dip of up to 7-8pp for a 3 to 6 month period over the next three years is highly likely.

Source: Experteye AG

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