According to the latest data published by the European Automobile Manufacturers' Association (ACEA), registrations during the month have increased by 6.7% year on year (y/y) to 999,157 units.

Carlos Da Silva, manager for IHS Automotive's European light-vehicle sales forecast said: ‘This is good news in itself, but what is more important is that for the first time in a quite long period this is not the only piece of good news.’

He added that there is some indication that the Eurozone might be on more solid ground than it had been, noting that the latest decisions by the European Central Bank (ECB) are instrumental.

He stated: ‘By formalising a quantitative easing [QE] policy to be launched in March, the ECB has stepped up and will be providing tools to prevent the region to enter a deflationary spiral – one of the main risks today. Through QE, the ECB will be putting more liquidities into the market which, normally, translates into improved lending conditions. For the vehicle market, this means credit should be more easily accessible. Considering that credit is the lifeblood of auto markets in general, this definitely carries a positive message.’ On top of this, Da Silva noted that there is ‘still plenty of pent up demand throughout Europe’ thanks to the passenger car market having shrunk by a quarter between 2007 and 2013, while OEMs now have their product cycles and vehicle launch strategy back on track.

However, despite this positivity, Mr Da Silva warned that the risks have not disappeared. Factors include the levels of public debt, which remains an ongoing issue for many countries, while Greece is again highlighting the inherent fragilities or contradictions of the Eurozone (although without the critical risks of 2011), as well as the many difficulties the unsolved Russian/Ukrainian crisis still raises.

Mr Da Silva also pointed to the nature of the current growth in the European passenger car market at present. Although replacement demand is playing its part, a fair share is largely artificial, driven by manufacturers pushing metal through ‘easier’ channels. This includes by manufacturers themselves through self-registrations, as well as dealers and rental companies, and in January they have not receded.

He pointed to the French market as a good example of this: After a lacklustre end of the year, the French passenger car market surprised on the positive side in January, jumping nearly 6% y/y. However, this was not due to private or business customers rushing back to showrooms – so-called ‘tactical sales’ were up nearly 25% y/y, representing one out of four cars sold this month. It is hard then to consider that growth is particularly healthy. This is also taking place in Germany, where 44% of registrations were in this fashion, up 9% y/y, while in Italy a 54% y/y rise in rental car demand meant that such customers represented 21% y/y of the market. He adds, ‘Knowing that the Spanish boom is also largely artificially supported by scrapping incentives, this leads to a less rosy picture, doesn't it?’

Mr Da Silva rounded off by saying: ‘All in all, Europe is undoubtedly confirming month after month that the worst has passed. Near term expectations are increasingly becoming more positive as the economic cycle seems to finally enter an improving phase. Yet we caution that the structure of the market is still quite shaky, current demand remaining too dependent on artificial support. Let's hope that the expected macroeconomic improvements will allow some correction here too.’

IHS Automotive forecasts that registrations will grow by around 2.2% y/y to 12.87 million units in 2015. The market remains well behind the pre-crisis average of around 15.2 million units. It also does not expect the market to return to these levels at least by the end of the decade, when it forecasts registrations standing at around one million units below that level.