Automotive Research - WE car demand in April 2017 Focus on Germany, France, Italy, Spain and UK

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Automotive Research
Sabine CJ Blümel
Monday, 22nd
May 2017
Sabine CJ Blümel
Principal
CGA (UK) LLP
sabine@cjblumel.com
+44 7785 301 588
Creative Global Advisers
(UK) LLP
64, Holland Park
London W11 3SJ
W Europe car market
May update
April only temporary set-back in market recovery
WE car registrations: -8.0% in April; +3.7% in YTD; +2.5% in 2017E
• April headline figures were affected by at least two fewer working days yoy in
most markets, and a sharp decline in the UK, caused by a road tax hike.
• The WE pc market was running at an April SAAR of 13.39m, down 8.7%
mom/from March’s 14.67m, the strongest month since November ’09 (14.78m).
YTD SAAR of 14.32m topped FY16’s 13.97m by 2.5% and remained 1.9% below
the 2000-07 LT pre-crisis level of 14.69m. (See pp.3-12.)
• Italy and Spain continued to be the most dynamic of the large Europen
markets, with resp. YTD growthrates of 8.0% and 6.1%, though they are still running
almost 15-20% below LT pre-crisis trend.
• In Germany, an 8.0% decline in April resulted in a 2.5% increase YTD. YTD
SAAR of 3.42m was 2.1% better than FY16’s 3.35m and 3.7% higher than the 2000-
07 LT pre-crisis level of 3.3m.
• UK car registrations declined 19.8% in April, resulting in a 1.1% increase YTD.
While the vote for Brexit on 23rd June seems to have had little to no impact on the
UK car market so far, the change and increase in road taxation for new cars
purchased after 1st April has greatly distorted sales over the past few months
• The WE car market is set to decelerate in FY17E and grow 2.5% to 14.32m.
The expected moderate FY17E increase of 350k units should again be spear-
headed by Italy and Spain and negatively affected by a decline in UK .
• The UK car market is expected to have peaked at 2.69m in FY16 and to decline
by -5.5% to 2.54m in FY17E. A weaker pound is set to trigger sharp increases in
sticker prices as 90% of cars sold in the UK are imports. (See pp.10-12 for details.)

2. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 2
Table of Contents
Western Europe car market ..............................................................................................................................................3
Germany........................................................................................................................................................................6
France............................................................................................................................................................................7
Italy ................................................................................................................................................................................8
Spain..............................................................................................................................................................................9
UK update....................................................................................................................................................................10

3. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 3
Western Europe car market
-8.0% in April
+3.7% in YTD
+5.8% to 13.97m in FY16
In April, WE passenger car registrations declined 8.0% yoy to 1.12m, after a 10.3%
increase in March, resulting in a 3.7% increase to 5.06m YTD. This follows increases of
7.4% in 1Q17 and 5.8% to 13.97m in FY16. Headline figures in April were affected by at
least two fewer working days yoy in most markets, whereas March benefitted from at
least one additional working day yoy in most markets.
YTD SAAR of 14.32m
In April, the SAAR weakened again to 13.39m, down 8.7% mom/from March’s 14.67m,
the strongest month since November ’09 (14.78m). YTD SAAR of 14.32m topped FY16’s
13.97m by 2.5% and was 1.9% below the 2000-07 LT pre-crisis level of 14.69m.
All Big 5 advance
strongly in YTD
Germany +2.5%
France +2.0%
UK +1.1%
Italy +8.0%
Spain +6.1%
Germany, Western Europe’s largest car market declined 8.0% in April and grew 2.5%
to 1.14m units YTD. YTD SAAR of 3.42m was 2.1% better than FY16’s 3.35m and 3.7%
higher than the 2000-07 LT pre-crisis level of 3.3m. French car registrations declined
6.0% in April and grew 2.0% to 0.71m YTD. YTD SAAR of 2.11m was up 4.5% on FY16’s
2.02m and 1.0% on the 2000-07 LT pre-crisis level of 2.09m. In the UK, the car market
declined 19.8% in April, resulting in an 1.1% increase to 0.97m units YTD. YTD SAAR
of 2.64m was 1.9% below FY16’s 2.69m and 8.0% above pre-crisis LT level of 2.45m by
13.6%. YTD, Italian car registrations increased 8.0% increase to 0.74m and the SAAR
of 1.99m was 8.9% higher than FY16’s 1.82m, but remained 15.0% below the 2000-07
LT pre-crisis level of 2.34m. YTD, Spanish car registrations increased 6.1% to 0.41m
and the SAAR of 1.19m was up 4.0% from FY16’s 1.15m and remained 19.3% below
the 2000-07 level of 1.45m. (See discussion of the Big Five on pp. 4-12.)
Economic indicators
continue to improve…
…Eurozone economy
Market set to decelerate
sparply…
…to 2.5% to 14.32m in
FY17E
In the Eurozone, GDP growth remained stable at 0.5 % qoq in 4Q16 and 1Q17, and GDP
is expected to grow by at least 1.7% in FY17E, at the same rate as in FY16 and barely
decelerate thereafter. Indeed, consumer and business indicators have continued to
improve, with the former hitting a 10-year high in May and the latter a six-year high in
April. However, in 2017 and beyond, we see considerable downside risks for the
Eurozone economy related to Brexit (weak sterling and economic slow-down in the UK),
elections in several countries (France, UK, Germany and Italy) and possible disruptions
to international trade, mainly due to president Trump. In addition, a pick-up in inflation
(base effect, recovery in commodity prices) should have a dampening effect on
disposable income and thus on private consumption, to date a main driver of GDP. For
the UK, GDP growth is expected to decelerate from 2.0% in FY16 to 1.6% in FY17E and
1.3% in 2018E. We expect that the WE car market is set to decelerate sharply from
FY16’s 5.8% to 2.5% to 14.32m in FY17E. While in FY16 the increase of 770k vehicles
was spearheaded by Italy, Germany and Spain, the expected moderate increase of 350k
units should be spear-headed by Italy and Spain and affected by a decline in the UK.
Competitive pressures
set to intensify as the
markets slows
During the four-year recovery, the WE car market remained overshadowed by tough
competition and pricing pressures. Indeed, as the market is heading for a considerable
slow-down, discounts have reportedly increased to some 20% in core markets, fleet
sales are taking over momentum from retail sales and HH leverage is increasing. In
addition to record discounts, special deals and cheap financing, OEMs and dealers have
increasingly resorted to tactics such as pre-registering. Since July‘16, the OEMs’ woes
have been exacerbated by a weaker pound and the prospect of a declining UK market.
Polarisation in demand The trend of polarisation in demand into premium and discount brands and products has
been intact for the past 20 years. Driving forces have been the downsizing on the part of
the premium brands and an improvement in quality of discount branded products. This
has dramatically eroded the market position and share of European mainstream brands
such as GM’s Opel/Vauxhall and Ford, and local champions such as Renault, Peugeot,
Citroen and Fiat. The mainstream brands of the VW group have incurred a reversal in
their market outperformance since the break of the diesel scandal in September ‘15.

4. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 4
W Europe – monthly SAAR1
vs. trend (Oct’08–Apr’17) W Europe – pc registrations (1998-2019E)
(1) SAAR according to calculations by LMC Automotive. Source: ACEA, LMC Automotive, CGA
(UK) calculations
Source: LMC Automotive and CGA (UK) estimates
W Europe – pc registrations (1961-2020E) Eurozone – real GDP and priv. consumption (2007-19E)
Source: ACEA, LMC Automotive and CGA (UK) estimates Source: Oxford Economics, IMFand CGA (UK) estimates
W Europe – depth of recession – 2008-20E volume
decline vs. 2007
W Europe – current recession in historic context
Depth1 Duration
Trend growth
rate
(Units m) (%) (years) (%)
1970 - oil shock -1.15 -12.4 < 3 5
Early 1980s recession -0.75 -7.0 ~ 6 3-4
1993 recession -2.26 -16.8 ~ 5 2-3
Current crisis (E) -3.26 -22.0 ~13 1-2
Source: LMC Automotive and CGA (UK) estimates Source: LMC Automotive and CGA (UK) estimates

5. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 5
Premium brands, Japanese and discount brands – WE
market share (’92-’17*)
Mainstream brands: VW group (excl. Audi & Porsche),
Opel/Vauxhall, Ford, FCA – WE share (’92-’17*)
(1) Premium brands: BMW, Mini, Mercedes-Benz, Smart, Audi, Lexus, Porsche, Jaguar, Land
Rover, Volvo, SAAB, DS and super-premium brands. (3) Discount brands: Kia, Hyundai, GM’s
Chevrolet, and Renault’s Dacia & LADA. (2) Exl. Lexus (*) YTD=Jan-Apr. Source: Association
Auxiliaire de l'Automobile, ACEA, CGA (UK) calcs
(1) VW mainstream brands: VW, Seat, Skoda. (2) FCA: Fiat, Lancia & Alfa Romeo. Since 2012
also Chrysler & Jeep. (*)YTD=Jan-Apr. Source: Association Auxiliaire de l'Automobile, ACEA,
CGA (UK) calculations
PSA & GME – WE share (’92-17*) PSA and Renault group – WE share (’92-’17*)
(1) (1) PSA: Peugeot, Citroën & DS brands (2) GM Europe: Opel, Vauxhall, Chevrolet and other
US GM brands. (*)YTD=Jan-Apr. Source: Association Auxiliaire de l'Automobile, ACEA, CGA (UK)
calculations
(1) PSA: Peugeot, Citroën & DS brands; (2) Renault group: Renault and Dacia brands.
(*)YTD=Jan-Apr. Source: Association Auxiliaire de l'Automobile, ACEA, CGA (UK) calculations
W Europe – pc market by OEM (FY16) W Europe – pc market by OEM (Jan-Apr’17)
(*) VW group incl. Porsche. (**) Fiat group incl. Chrysler and Jeep. Source: Association Auxiliaire
de l'Automobile, ACEA and CGA (UK) calculations
(*) VW group incl. Porsche. (**) Fiat group incl. Chrysler and Jeep. Source: ACEA and CGA (UK)
calculations

6. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 6
Germany – monthly SAAR1
vs. trend (Oct’08-Apr’17) Germany – pc registrations (1998-2019E)
(1) SAAR according to LMC Automotive. Source: KFBA, LMCA and CGA (UK) calculations Source: KFBA, LMC Automotive and CGA (UK) estimates
Germany
-8.0% in April
+2.5% in YTD
YTD SAAR of 3.42m
In April, the German pc market declined 8.0% yoy to 290.7k units, after having increased
11.4% in March, resulting in a 2.5% increase to 1.14m units in YTD. This follows
increases of 8.2% in 1Q17 and 4.5% to 3.35m in FY16. Headline figures were affected
by three fewer working days yoy in April and two additional working days yoy in
March’17. Underlying demand declined again in April, to a SAAR of 3.20m, 7.5% down
mom/from a SAAR of 3.45m in March and was thus 10.4% weaker than January’s 3.57m,
the strongest month since the subsidy boosted October ’09 (3.65m). YTD SAAR of
3.42m was 2.1% better than FY16’s 3.35m and 3.7% higher than the 2000-07 LT pre-
crisis level of 3.3m.
+2.0% to 3.42m in FY17E
The combination of a tight labour market, rising wages and disposable income have kept
consumer confidence stable at a 10-year high and should ensure that consumption will
remain a key macro-economic driver. In 2017E-18E, the German economy is therefore
expected to decelerate only moderately from FY16’s 1.9%. GDP growth even
accelerated in 1Q17, to 0.6% qoq, from 0.4% in 4Q17, driven by domestic and foreign
demand and investments. However, the danger of a disruption to international trade
poses a downside risk. After a 4.5% increase in FY16, the German car market is set
to grow another 2.0% to 3.42m in FY17E. Replacement demand from the incentive-
driven boom in 2009, when 3.81m cars had been sold should be a supporting factor.
Past 11 months saw
some reversal of retail
share decline…
..driven by aggressive
marketing
During its solid recovery over the past four years, the pricing improvement has been only
moderate with discounts reportedly above 20% and the quality of the market poor.
Accounting for more than 30% of car sales, pre-registrations are sold by dealers as
‘used’ cars at considerable discounts. With the market back at pre-crisis level and growth
slowing, aggressive marketing to private customers has intensified and explains why,
over the past 11 months, against LT trend, retail sales have outperformed fleet sales, up
3.9% to a 33.8% share in YTD, compared to 33.3% in YTD16 and 35.0% in FY16.
Germany – pc market shares (2010,13,15,16) Germany – real GDP and priv. consumption (2007-19E)
(*) VW group incl. Porsche. Source: KFBA and CGA (UK) calculations Source: Oxford Economics, IMF and CGA (UK) estimates

7. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 7
France – monthly SAAR1
vs. trend (Oct’08-Apr’17) France – pc registrations (1998-2019E)
(1) SAAR according to calculations by LMC Automotive. Source: CCFA, LMC Automotive and
CGA (UK) calculations
Source: CCFA, LMC Automotive and CGA (UK) estimates
France
-6.0% in April
+2.0% in YTD
In April, French car registrations declined 6.0% to 171.9k units, after having increased
7.0% in March, resulting in a 2.0% increase to 0.71m YTD, This follows increases of
4.8% in 1Q17.and 5.1% to 2.02m in FY16. Adjusted for the number of working days, the
market was up 3.9% in April, 2.0% in YTD and 1.6% in 1Q17.
YTD SAAR of 2.11m
In April, underlying demand weakened again to a SAAR of 2.01m, 7.5% down mom/from
March’s SAAR of 2.17m and remained 8.1% below January’s 2.19m that had been the
strongest month since February ‘11. YTD SAAR of 2.11m was up 4.5% on FY16’s 2.02m
and 1.0% on the 2000-07 LT pre-crisis level of 2.09m.
Economy
underperforming,…
…but not fragile
France’s macro-economic credentials have remained mixed as GDP growth decelerated
again from 1.3% in FY15 to 1.2% in FY16, and more recently from (a revised) 0.5% qoq
in 4Q16 to 0.3% in 1Q17. Private consumption should remain a key economic driver as
consumer confidence has steadily improved throughout the past four years to pre-crisis
levels, helped by low inflation and a (slow) improvement in the labour market.
Macron’s scope for
reform determined by
the June parliamentary
election
France’s economic performance from 2018 onwards will greatly depend on the progress
pro-business president Macron will be able to make in tackling France’s many structural
problems; top of his list is reform and deregulation of the rigid, two-tier labour market.
The outcome of the forthcoming parliamentary elections in June will determine Macron’s
scope of manoeuvre for his domestic reforms.
+1.7% to 2.05m in FY17E
With a medium-term outlook for the French pc market of 2.1-2.2m units, we expect
a 2.5% increase to 2.07 in FY17E, after 5.1% in FY16.
France – pc market shares (2010,13,15,16) France – real GDP and priv. consumption (2007-19E)
(*) VW group incl. Porsche. Source: CCFA and CGA (UK) calculations Source: Oxford Economics, IMF and CGA (UK) estimates

8. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 8
Italy – monthly SAAR1
vs. trend (Oct’08-Apr’17) Italy – pc registrations (1998-2019E)
(1) SAAR according to calculations by LMC Automotive. Source: ANFIA, UNRAE, LMC Automotive
and CGA (UK) calculations
Source: ANFIA, UNRAE, LMC Automotive and CGA (UK) estimates
Italy
-4.6% in April
+8.0% in YTD
YTD SAAR of 1.99m
In April, the Italian pc market incurred the first yoy decline after 34 consecutive months
of growth due to two fewer working days yoy. The 4.6% decline to 160.7k units in April
followed a 18.2% increase in March, resulting in a 8.0% increase to 0.74m YTD This
follows increases of 11.9% in 1Q17 and 15.8% to 1.82m in FY16. Underlying demand
weakened again in April, to a SAAR of 1.81m, down 14.6% mom/from March’s SAAR of
2.12m that had been the strongest month since December 2010 (2.15m). YTD SAAR of
1.99m was 8.9% higher than FY16’s 1.82m, but remained 15.0% below the 2000-07 LT
pre-crisis level of 2.34m.
Economic recovery
remains anemic
Banking sector danger
to eonomy
Italy’s recovery from a three-year, triple-dip recession has struggled to gain any
momentum and GDP growth remained anaemic at 0.8% in FY15 and 0.9% in FY16.
Private consumption, the main driver of Italy’s recovery so far, is set to decelerate from
1.6% in FY15 and 1.3% in FY16, to well below 1% in 2017E-18E, as employment growth
eases and energy prices and inflation pick up. This is supported by consumer confidence
that has weakened since the beginning of 2016, though remained at levels not seen
since 2002. In 1Q17, GDP growth failed to accelerate from 4Q16’s 0.2%. The
extraordinarily weak banking sector, together with a multitude of structural problems, are
set to continue to keep economic growth to well below 1% in 2017E-18E.
The political
stabilisation process
has continued
Since Matteo Renzi’s resignation as PM (in December’16), national politics have
remained relatively calm under a care-taker government with former foreign minister
Paolo Gentiloni at the helm. However, the government is facing challenging decisions
on next year’s budget, the banking sector crisis and the future of Alitalia, raising the
possibility of early parliamentary elections before February 2018.
+9.0% to 1.99m in FY17E In view of the economic recovery, modest as it may be, a large car parc and considerable
pent-up demand, the Italian car market is set to continue to recover strongly. We expect
that the market will grow 9.0% to 1.99m units in FY17E, after 15.8% in FY16.
Italy – pc market shares (2010,13,15,16) Italy – real GDP and priv. consumption (2007-19E)
(*)VW group incl. Porsche. Source: Anfia and CGA (UK) calculations Source: Oxford Economics, IMF and CGA (UK) estimates

9. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 9
Spain – monthly SAAR1
vs. trend (Oct’08-Apr’17) Spain – pc registrations (1998-2019E)
(1) SAAR according to calculations by LMC Automotive. Source: ANFAC, LMC Automotive and
CGA (UK) calculations
Source: ANFAC, LMC Automotive and CGA (UK) estimates
Spain
+1.1% in April
+6.1% in YTD
YTD SAAR of 1.19m
In April, Spanish car registrations grew 1.1% yoy to 101.4k units, after 12.6% in March,
resulting in a 6.1% increase to 0.41m YTD. This follows increases of 7.9% in 1Q17 and
10.9% to 1.15m in FY16. Spain was the only large WE market that reported a yoy
increase in April headline sales, despite two fewer selling days; while retail sales fell
14.0% yoy, sales to rental companies jumped 36.0%, ahead of the summer holiday
season. In April, the SAAR strengthened again to 1.25m, up 10.8% mom/from March’s
1.13m and remained just 1.7% below September’s record 1.27m. YTD SAAR of 1.19m
was up 4.0% from FY16’s 1.15m and remained 19.3% below the 2000-07 level of 1.45m.
Government incentive
scheme allowed to
expire after 46ms…
…as the economy has
accelerated
The strong recovery in the Spanish car market with the SAAR more than doubling
between September’12 (0.56m) and September’16 (1.27m), was initially primarily driven
by the PIVE scrappage scheme. First introduced in October ‘12, the Spanish government
topped up the scheme seven times, but let PIVE 8 expire as scheduled. During the 46ms
of stimulus, the economic recovery has gained momentum and has together with
replacement demand become the main driver. Buoyant fleet and rental sales have
prevented a dramatic pay-back in the Spanish market following the expiry of the PIVE
scrappage scheme at the end of July. On this basis, the Spanish pc market is set to
grow 6.3% to 1.22m in FY17E, after 10.9% to 1.15m in FY16.
+6.3% to 1.22m in FY17E
Spain has become one of the fasted growing economies in the Eurozone, with GDP
growing at 3.2% in FY15 and FY16. The recovery has been driven by domestic demand
and more recently, also by net exports. The economic outlook remains positive, GDP
and private consumption are expected to decelerate only moderately in 2017E-18E. In
1Q17, GDP growth even accelerated to a (prel) 0.8% qoq, from 0.7% in 4Q16. Consumer
confidence has stabilised at pre-crisis levels. However, unemployment, though having
eased considerably to a 7-year low in 4Q16-1Q17, at just below 19% has remained the
second highest in the EU, behind Greece and should remain a drag for years to come
Spain – pc market by OEM (2010,13,15,16) Spain – real GDP and priv. consumption (2007-2019E)
(*) VW group incl. Porsche. Source: ANFAC and CGA (UK) calculations Source: Oxford Economics, IMF and CGA (UK) estimates

10. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 10
UK – monthly SAAR1
vs. trend (Oct’08-Apr’17) UK – pc market by OEM (2010,13,15,16)
(1) SAAR according to calculations by LMC Automotive. Source: SMMT, LMC Automotive and
CGA (UK) calculations
(*) VW group incl. Porsche. Source: SMMT and CGA (UK) calculations
UK update
-19.8% in April
+1.1% in YTD
In April, UK car registrations declined 19.8% yoy to 152.1k units, after having increased
8.4% in March, resulting in a 1.1% increase to 0.97m units YTD. This follows increases
of 6.3% in 1Q17 and 2.3% to a record 2.69m in FY16,
Increase in road tax for
new cars purchased
after 1st April…
…has greatly distorted
sales over the past few
months
While the vote for Brexit on 23rd June seems to have had little to no impact on the UK
car market so far, the change and increase in road taxation for new cars purchased after
1st April has greatly distorted sales over the past few months. From 1st April, under the
new system all new cars, except those with zero emissions (i.e. BEVs and hydrogen
cars), are subject to a new vehicle excise duty (VED), an annual flat road tax. As
expected, sales of new and pre-registered cars spiked and reached record levels in
March and 1Q17 as buyers brought forward their car purchases, leading to a pay-back
in April.
YTD SAAR of 2.64m Indeed, in April, the SAAR fell sharply to 2.23m, down 21.1% mom/from March’s 2.83m
and down 19.6% from 1Q17’s 2.78m; it thus remained 25.3% below December 2015’s
all-time record SAAR of 2.99m. As a result, YTD SAAR of 2.64m was 1.9% below FY16’s
2.69m and 8.0% above pre-crisis LT level of 2.45m by 13.6%.
The economy remained
resilient in 2H16….
The UK economy remained resilient following the EU referendum and failed to decelerate
in 2H16, from 0.6% in 2Q16 thanks to buoyant private consumption that was driven by a
sharp increase in consumer borrowing. As a result, the FY16 GDP growth rate of 2.0%
was in line with pre-referendum estimates, and only slightly lower than FY15’s 2.2%.
Short-term outlook Short-term economic outlook: Economic indicators remain mixed but point to an
economic slowdown; this is particularly true for the consumer sector. GDP growth
decelerated in 1Q17, to 0.3% qoq, from 0.7% in 4Q16, due to a weakness in
consumer-facing service-sector companies
A weaker sterling set to
bite UK economy from
2017 onwards
Although having strengthened recently (due to hopes for a softer Brexit), sterling’s
current trading position vs. pre-referendum level is still down 10% on a trade-weighted
basis, 10% against the euro and 13% against the dollar. A weaker sterling together
with firming energy prices is expected to continue to fuel consumer price inflation
and squeeze disposable income and thus hamper private consumption. CPI is
expected to continue to rise over the next 12 months, to average more than 3% in 2017,
exceeding the BoE target of 2%. Indeed, the inflation rate rose from less than 0.5% in
1H16 and 0.8% in 2H16, to 2.7% in April.
1.8% in FY17E
1.3% in 2018E
Market consensus forecast is that UK GDP growth will decelerate from +2.0% in FY16
to +1.8% in FY17E and 1.3% in 2018E and that private consumption will decelerate even
more drastically, from 2.8% in FY16 to +1.9% in FY17E and 1.0% in 2018E.

11. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 11
UK – real GDP and priv. consumption (2007-19E) UK – pc registrations (1998-2019E)
Source: Oxford Economics, IMF and CGA (UK) estimates Source: SMMT, LMC Automotive and CGA (UK) estimates
UK – Consumer confidence (Jan’08-Apr’17) UK – Busines confidence (2Q14-2Q17)
Source: GfK NOP (UK) through Trading Economics Source: CBI through Trading Economics
Car market has
decelearted since
2014…
Even before the EU referendum, the UK car market had been approaching the end of its
longest growth period on record. It had been driven by pent-up demand, easy credit,
aggressive marketing and a continuing economic recovery, with GDP up 2.9% in 2014
and 2.2% in FY15. Falling petrol prices, zero inflation and accelerating earnings growth
had turbo-charged consumer confidence to record levels and private consumption
accelerated from 2.5% in FY14 to 2.9% in FY15.
...and is expected to
have peaked in FY16
The slowdown in the UK market was heralded throughout 2015 by the fact that
fleet/business sales have taken over from retail as market driver; a trend that intensified
during 2016. Indeed, in FY16, retail sales dipped -0.2% and their share declined to
44.8%, down from 45.9% in FY15. In 1Q17, retail sales were up only 3.6%, reducing the
1Q17 retail share to 47.1% share, vs. 48.3% in 1Q16. In April, retail sales declined -
28.4% yoy to a 39.4% share.
Weaker pound set to
trigger hike in sticker
prices
Going forward, in addition to private consumption decelerating sharply, the UK car
market is set to be affected by a weaker pound and the ensuing hike in car prices. Indeed,
the UK car market is uniquely vulnerable to a weaker sterling as almost 90% of LVs/cars
sold in the UK are imported. Even locally produced vehicles have a comparatively low
domestic content.
-5.5% to 2.54m in FY17E We expect that the UK car market will start to decline, by -5.5% to 2.54m in FY17E,
after five years of growth. The change of road taxes for new cars is expected to
continue to hamper car sales in the short term. In the medium term, challenges include
Brexit and possibly tighter rules for car financing such as PCP (Personal Contract
Purchasing). The FCA (Financial Conduct Authority) stated its intension to launch a
review into finance packages offered to car buyers, due to concerns that there might be
‘irresponsible lending in the motor finance industry.

12. Sabine CJ Blümel – Automotive Research 22/05/2017
CGA (UK) LLP sabine@cjblumel.com +44 7785 301 588 Page 12
UK – Retail sales (Jan’08-Apr’17) UK – Manufacturing PMI (Jan’08-Apr17)
Source: Office for National Statistics (UK) through Trading Economics Source: Markit/CIPS through Trading Economics
GBP/USD (since 1/1/2016) GBP/EUR (since 1/1/2016)
Source: Bank of England Source: Bank of England
GBP trade-weighted index (since 1/1/2016) UK gilt - 10-year yield (%) (since 1/1/2016)
Source: Bank of England Source: Bank of England
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