The European automotive market is currently undergoing a significant downturn, with major players like Volkswagen, Mercedes, Aston Martin, and BMW revising their financial forecasts downward due to worsening conditions. A leaked memo from a senior executive at Stellantis has raised alarms about the deteriorating market, a sentiment echoed by recent data from Bloomberg indicating a continued decline in new car registrations. Specifically, figures from the European Automobile Manufacturers’ Association revealed that new car registrations fell by 4.2% in September compared to the same month the previous year, totaling 1.12 million units. This decline marks the second consecutive month of falling registrations since mid-summer 2022, highlighting that while there are gains in electric vehicle (EV) sales, they are not sufficient to counter the downturn in combustion-engine vehicle sales.
Despite a slight recovery in the demand for electric vehicles in September, European consumers remain hesitant to invest in more expensive EV models. Instead, the trend has shifted towards more affordable options within the segment. In the UK, EV sales experienced a 24% increase, buoyed by significant discounts as manufacturers strive to meet the government’s zero-emissions vehicle sales target. Similarly, in Germany, discussions around new incentives have resulted in an 8.7% uptick in EV sales. However, these positive shifts are overshadowed by the substantial decline experienced by Stellantis, which reported a staggering 26% drop in new car sales during the same period, illustrating the challenges facing the wider industry.
The ongoing struggles in the automotive sector are reflected in the performance of market indices, such as the MSCI Europe Automobiles and Components Index, which has made several attempts at establishing new all-time highs over the past decade, yet has consistently failed to do so. Currently down approximately 10% for the year, this index further underscores the pressure faced by global automakers as they navigate challenging market conditions. Additionally, the MSCI World Automobiles Index reveals that this pressure is not confined to Europe but is a broader global phenomenon, indicating a significant downturn across the entire industry.
Looking towards the horizon, the automotive industry is bracing for further challenges as it approaches 2025. High interest rates and elevated vehicle prices are making car ownership increasingly unaffordable for many consumers, creating a difficult landscape for manufacturers. This trend is not limited to Europe; similar issues are being observed in the US market, amplifying concerns among automakers who must contend with a tightening financial environment that could stifle sales and growth opportunities.
Economic uncertainty, compounded by geopolitical tensions, is contributing to a crisis mode within the European automotive sector, as noted by Constantin Gall, managing partner at EY for Western European markets. With a weakening economy and no signs of recovery in the near term, both private and commercial customers are exhibiting caution in their purchasing decisions. This landscape paints a bleak picture for the remainder of 2023, with automakers re-evaluating their strategies and adjusting to a new normal characterized by declining sales and shifting consumer preferences.
In summary, the European automotive market is experiencing a pronounced downturn characterized by declining new car registrations and a bleak outlook heading into 2025. Major manufacturers are adjusting their financial forecasts in response to challenging market conditions, while EV sales, despite some recovery, are insufficient to offset losses in combustion-engine sales. The struggles within the industry are reflected in market indices, and factors such as high interest rates and economic instability continue to challenge consumer affordability, suggesting that automakers will need to navigate a complex landscape to stabilize and regain market footing.
