Established automotive markets were mostly responsible for a 4.2% increase in sales in June, while South America and Eastern Europe struggled. By John Challen.

West European light vehicle sales were up in June

Light vehicle sales in the US totalled 1.55 million in June, up 5.4% year-on-year (YoY). The US was the only country to grow in North America, meaning that the region expanded 3.8% from June 2017. This June volume translates into a selling rate of 17.4 million units a year, up 0.5 million from last month. SUVs soared by 16%, bringing average transaction prices to $32,092, up by 1.4% YoY. Incentives increased 1.8%, to $3,860, which helped retail sales to grow 4.3% YoY.

Sales in Canada keep deteriorating and fell 1.8% YoY in June, one percentage point more than in May. The 200,000 units sold in June translate into a selling rate of 1.97  million units a year, the third month in a row that it has fallen below two million. Mexico faced declining sales for the 13th consecutive month, with 119,000 units sold in June, down by 6.1% YoY.

Europe

West European light vehicle sales increased by 4.4% in YoY terms in June, although the regional selling rate fell back from 16.8 million units a year in May to 16.5 million units a year in June. Overall, the regional market is still set to grow this year, albeit at a slower rate than in recent years, and with significant variation between stronger performers such as Spain and France, and struggling markets such as the UK and Italy.

June’s Russian light vehicle sales came in at just over 156,000, a rise of 10.8% YoY. This increase suggests that underlying demand is holding up well despite higher excise duties, a hike in utilisation fees and currency-induced price increases. The June light vehicle selling rate was just over 1.8 million units a year, representing a small slowdown from 1.89 million units a year in May.

China

As expected, sales (i.e., wholesales) in China slowed in June, but not as much as the escalating US-China trade war would suggest. According to preliminary data, the June selling rate was 28.9 million units a year, down more than 3% from May, and the second consecutive month of month-on-month decline. The US-China trade disputes have caused uncertainty over the prices of imports, which apparently made consumers hold off on purchases of imports. Slowing sales also mirror an economy that is losing steam. Nonetheless, on a YoY basis, sales increased by over 4% in June and nearly 5% in H1 2018.

Looking ahead, some slowdown in sales (especially sales of imports) looks unavoidable, especially in coastal provinces that are heavily reliant on exports. Yet, the Chinese Commerce Ministry announced that it would use the higher tariff revenues from the counter-measures to relieve the negative impact of the trade war on exporters.

Other Asia

The Japanese market lost some steam in June, with the selling rate falling to 5.2 million units a year, although that was not a bad result for this mature market. On a YoY basis, sales declined by 1.8% in H1 2018, amid the clouding global outlook, the scandal at Subaru, and weakening consumer and business confidence.

After two months of robust sales, the selling rate in South Korea moderated to 1.7 million units a year in June, down 5.6% from May. On a YoY basis, sales declined by over 5% in June. The positive impact of new model launches and aggressive incentive campaigns among imports appears to be fading.

South America

Sales in Brazil held up well in June, despite the negative impact from the nationwide truckers’ strike in May and disruptions caused by the FIFA World Cup. The June selling rate was 2.38 million units a year, up slightly from May. Nonetheless, the pace of the sales recovery appears to be stalling, in the face of the weakening real, rising inflation and a slow recovery in the job market.

In Argentina, the plunge in the peso, massive interest rate hikes and higher inflation have started to impact light vehicle sales. Sales fell by 17% YoY in June, the first YoY decline in two years. The government has secured a $50 billion bailout programme from the IMF, but the peso is continuing to fall.