DAVID FURLONGER: Economic headwinds? We’re lucky!

Car marketers worried about the state of the SA motor industry should thank their lucky stars they’re not in Europe. While the SA market continues to resist economic headwinds that some analysts think should be blowing it backwards, sales in the UK, Germany and France really are struggling.

In all three markets, year-on-year sales in August rose slightly for the first time in several months. In the UK, the increase was 1.2% after five consecutive monthly deficits. Germany improved 3% and France 3.8%.

Compare that with SA’s August figures: car sales were 14.6% higher than a year earlier, and combined sales of cars and commercial vehicles up 14.2%. Aggregate car sales for the eight months to August were 23.1% ahead of 2021.

In France the year-to-date car market is down 14%, in Germany 9.8% and in the UK 10.7%. Europe’s post-Covid car sales boom has yet to happen — unless, that is, you happen to sell electric vehicles (EVs). In the UK, EV sales grew 35% last month. For the year to August, they rose 49%.

All three European markets blame a shortage of components, mainly semiconductor microchips, for many of their woes. According to US market intelligence company AutoForecast Solutions, the global industry has had to cut planned production so far this year by more than 3-million vehicles because of the chip shortfall. In 2021, the total was more than 10-million.

By mid-August, says AutoForecast, North American vehicle manufacturers were worst hit, having been forced to can 1.09-million vehicles, followed by Europe (1.05-million), Asia excluding China (620,500), South America (139,100), China (128,900) and the Middle East and Africa (40,600).

Some European companies think some chip supply normality may return by year-end. UK market intelligence company S&P Global Mobility begs to differ. Despite massive government incentives being tabled in North America, Asia and Europe to encourage more chip manufacture, senior analyst Phil Amsrud thinks it may take until at least 2024 for supply to come anywhere near demand.

Of course, components shortages aren’t the only reason for vehicle sales to remain under pressure. As in SA, spiralling inflation and a looming cost-of-living crisis are also undermining consumer confidence in developed countries.

In Europe, of course, there’s also the small matter of the Ukraine war on their doorstep, and Russian President Vladimir Putin’s decision to cut off fuel supplies to countries supporting economic sanctions against his country — a move likely to cause fuel rationing during the European winter.

David Leggett, of data and analytics company GlobalData, says of the UK market: “[We] forecast that the UK car market will decline slightly to a low of 1.6-million units in 2022, with a slow recovery to 1.79-million units next year — still well adrift of the pre-pandemic market of 2.3-million in 2019.

“Manufacturers will face major headwinds and a tougher market over the next 18 months. In many respects, August’s market may be seen as the calm before the storm.”

German motor industry officials think the overall European market could shrink 4% this year.

However, that appears not to be enough to deter Volkswagen (VW) from launching what could be one of the world’s biggest stock exchange listings. The company this week announced its intention to list its sports car brand, Porsche — a move that investors think could value the new company at between €60bn and €95bn.

VW hopes the IPO will be complete by the end of the year but says the plan is “subject to further capital market developments”. That’s just as well, since many European stocks, including fellow luxury car brands Ferrari and Aston Martin, have lost value this year in a general weakening of European stocks.

Reuters reported this week that listing insiders say VW may delay the process, or even suspend it, if investor interest is deemed insufficient.

US publication Automotive News quoted a senior German company, with shares in VW, as saying: “Market conditions are currently very unfavourable.”

An analyst at US investment bank Stifel observed: “VW should work on its timing: the plan to IPO was announced the very same day Russia invaded Ukraine, the ‘intention to float’ comes out exactly when Russia stops supplying gas to Germany.”