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Is Europe's car market in terminal decline? How Brexit is changing the way we buy cars

land Rover Defender - in mild disguise
The eagerly anticipated new Land Rover Defender is clearly one of the star cars at this year's Frankfurt show

Does anyone go to motor shows these days? Discuss. Even Frankfurt, the world’s leading auto fest by size (it occupies most of downtown Frankfurt, with a motorway and a railway line running through it), which falls on biennial autumns and used to get more than 850,000 people through the turnstiles, is struggling.

Called the Frankfurt Internationale Automobil Ausstellung (IAA) and opening to the public on September 12, there’s a slight hint of desperation in the organisers’ press releases and a higher than usual litany of no-shows including Aston Martin, Bugatti, Citroën, Ferrari, Fiat, Jeep, Kia, Lancia, Mazda, Renault-Nissan, Peugeot, Rolls-Royce, Suzuki, Subaru, Tesla, Toyota and Volvo.

“The International Motor Show ‘IAA’ Faces Challenges,” gushed The Berlin Spectator, detailing the show’s embracement of “Mobility Solutions”, with a conference and networking centre doubtless full of patronising Silicon Valley electric-vehicle wonks telling us how perfect our lives will be when they get their Mole wrenches firmly clamped around our bank accounts and personal data.

These sorts of unimaginative attempts to update car shows can be seen from Los Angeles to Geneva; they don’t cut much mustard. It will be interesting to see whether the Detroit show’s move from January to next summer and its merging with Motor City’s automotive carnival events such as the Woodward Dream Cruise has more success – and credibility. 

For now, however, the undoubted IAA stars such as Land Rover’s new Defender, Porsche’s all-electric Taycan, the production version of Volkswagen’s EV family hatchback the ID 3 and BMW’s Vision M Next concept should grab enough headlines to paper over the cracks. Those car makers, however, aren’t taking any chances and have released most of the newcomers’ details before the Frankfurt press day – many have even been driven in the new Defender, for example, and full details of the Taycan are on my computer under embargo.

Porsche has made some bold claims for the Taycan, its first fully-electric sports car

So is this a sign of a depressed European market, car buyers lacking confidence in the face of political uncertainty, or everyone worried about the variable emissions regulations coming out of EU and UK regions and cities? Just what sort of car should you buy these days? And if you try driving a 15-year-old car across Europe you’ll understand just how restrictive some of these new laws are. 

Car makers are as usual sitting on their hands, most having laid off their Government Affairs departments. Besides, after the VW emissions-cheating scandal, no politician worth their salt would want to be seen talking to a car maker, although we’ll see what their reactions are when European factories start to close and unemployment starts to rise.

As for the car business itself, there are some signs of quiet hope if not reasons to be cheerful. According to industry analyst Jato, July’s European sales figures, at 1.33 million vehicles, were the highest July volume since 2007; registrations were up 1.2 per cent in the month, but overall the market is down 2.5 per cent. 

Economists are predicting a forthcoming recession in the US and Europe, which doesn’t bode well, but car sales are to an extent self-correcting since, while replacement cycles can be deferred, in the end people simply need to replace their wheels.

PSA, which makes Citroen, Peugeot and DS and now also owns Vauxhall and Opel, did well with the first two brands in August

So who did well and with which cars? Jato’s analysis shows that Peugeot-Citroën, Ford, Mercedes, Opel Vauxhall, Skoda, Dacia, Seat, Mazda, Mini and Land Rover were up all up in July. 

Nissan, Renault, Fiat, Audi, Volkswagen, Mitsubishi and Honda did poorly despite the market’s modest growth.

Cars improving share were the Toyota Corolla (although its 16,888 sales in July came from nothing in 2018), VW T-Cross (actually all VW SUVs did well), Citroën’s C5 Aircross which was shortlisted for last year’s Car of the Year, Ford’s excellent Focus up 65 per cent and Mercedes-Benz’s A-class which was up 51 per cent. 

On the naughty step were Toyota’s invisible Auris, VW’s Golf (down 17.5 per cent, although still Europe’s best seller) and VW Polo (down 22.3 per cent), along with the Renault Clio and Mégane.

SUVs were again dominant, with VW's T-Cross selling particularly well

And the type of car doing well? You’ll know this; Sport Utility Vehicles (SUVs) including crossovers are booming, taking 38 per cent of the market. When will this madness stop, you might ask? One answer might be the UK Government’s failure to do much about the £10 billion backlog in road repairs, including 7.8 million unfilled potholes...

Of the big European markets, only Poland, Germany and Italy were up in July (although Italy is down so far this year). All the other majors are down including the UK, which is also suffering in terms of car building and engine building output. 

My inbox pinged all morning when the Society of Motor Manufacturers and Traders’ (SMMT) August figures came out last week. The most strident and numerous pings were from wildly overexcited EV charging firms demanding I write about the 378 per cent increase in Battery Electric Vehicle (BEV) sales. They should calm down. The August sales figures for BEV were 3,147 against a total market worth 92,573 – do the maths.

Sales of plug-in hybrids such as the Mitsubishi Outlander PHEV were slow, largely as a result of the UK government axing reducing previously generous tax benefits

Hybrid (HEV) and Plug-in-Hybrid (PHEV) sales in the same period were only 4,921 – largely a consequence of the UK Government reducing previously generous tax benefits to PHEV to a big fat zero. Hybrid clearly is a growing factor in the market, but full exploitation of this technology isn’t likely to come about without the wholesale adoption of 48-volt electrics, which allow electric power to be garnered in greater amounts and faster. It might help if Government did a bit more thinking about the effects of its actions.

And what of the bad-boy fuel, diesel? “The diesel crisis continues,” says Felipe Munoz, senior analyst with Jato. “Despite the strong fall [in sales] posted in 2018, this year the trend continues. Volume fell by 15% through July, counting for only 32% of the total.”

Car makers assure us that modern diesel is as clean as petrol, if not cleaner, but we also know that it comes at a cost in a diesel car’s purchase price, complexity, longevity and driveability. And, as we said, no one believes car makers any more.

As diesel continues to decline in popularity, manufacturers are having to face a backlog of new and used models Credit: Lynne Cameron/PA

Either way the diesel hangover is still with us, as there are still many thousands of diesel cars in the new-car pipeline and tens of thousands in the second-hand supply chain. As accountant and financial adviser Deloitte reported last week: “Problems are mounting up for manufacturers and their partners. For example, as sales continue to decline, the industry is having to manage a surplus stock of new and used cars.”

There, I've done a complete motor show preview without mentioning Brexit once. Only there is a bit of a Brexit sting in the tail here. 

That same Deloitte report also mentioned the value of the pound against the euro, which has fallen 16 per cent in the last three years and five per cent in the last six months as markets price in a disorderly exit from the EU. 

So far car makers have successfully hedged against these changes, but that won’t be forever and pretty soon the extra costs are going to be passed on to the consumer. As the report points out: if they do this at a time of surplus stock in used cars, this could put a huge dent in demand.

You have been warned...

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