The French passenger car market has risen 6.8% y/y during 2015 to 1.917 million units, which has contributed to an improvement in the wider light-vehicle market of 5.9% y/y. The performance of the French light-vehicle market – and notably the passenger car sector – has improved robustly compared to 2014. It has been helped by the normalization process of the market, improved economic factors and new models, although tactical sales have also played a part. IHS Automotive anticipates improvements in light-vehicle sales during 2016. We currently expect passenger car registrations to increase by over 3.5% y/y and LCV demand to grow by around 7.5% y/y during 2016. The light-vehicle market in France has recorded a 5.9% year-on-year (y/y) gain during 2015 after a flat 2014. According to the latest data published by the French Automobile Manufacturers' Association (Comité des Constructeurs Français d'Automobiles: CCFA), registrations of passenger cars and light commercial vehicles (LCVs) grew from 2,167,959 units to 2,296,654 units. This improvement was supported by a further gain in the final month of the year when registrations were lifted by 11.8% y/y to 223,598 units, with no difference in the number of working days during December 2015. The growth in the light-vehicle category during the year was driven by the passenger car segment. Registrations of such vehicles have grown by 6.8% y/y to 1,917,230 units, which was in turn helped along by a gain during December of 12.5% y/y to 183,724 units. The two domestic automakers had similar degrees of growth in the passenger car sector during 2015, although both were behind the gain in the market as a whole. PSA Peugeot-Citroën recorded a gain of 4.2% y/y to 558,715 units. The Peugeot brand led the way during the year with an increase of 7.3% y/y to 327,393 units, helped by the ongoing success of recent launches. The Citroën brand recorded more moderate growth with an increase of 0.8% y/y to 201,065 units. However, its premium DS brand dipped 4.7% y/y to 30,257 units, although there was a 55.0% y/y uplift during December 2015. The Renault Group rose 5.2% y/y during 2015 to 479,945 units, supported by a 26.7% y/y increase in December. Both its brands contributed to the gain in the month, which helped Renault reach annual sales of 382,504 units (a gain of 8.1% y/y). However, this was still unable to help Dacia's sales in to positive territory during 2015, where it has seen a fall of 5.0% y/y to 97,441 units. For foreign OEMs, the news has also been largely positive during 2015, with nearly all seeing some kind of gain. This group included Ford (+7.5% y/y), Toyota (+8.5% y/y), Nissan (+9.5% y/y), Fiat Chrysler Automobiles (FCA; +13.9% y/y) and Hyundai Group (+17.1% y/y). Premium automakers have also put up a strong performance with BMW Group gaining by 15.3% y/y and Daimler having grown by 19.1% y/y. Nevertheless, some brands lagged during the year. One of those was the Volkswagen (VW) Group which rose just 3.9% y/y to 246,710 units, as it recorded a 8.9% y/y decline during December. Part of this could be related to the impact of the diesel emission issues that arose in the final quarter of the year in some markets. However, there is also likely to be some impact related to the age of some models and some that are making the transition to a new generation. Another poor performer during 2015 has been General Motors (GM) which suffered a decline of 1.7% y/y as the Chevrolet brand was further phased out. This was despite a 4.8% y/y gain for the Opel brand, which will be its key offering going forward. For LCVs with a gross vehicle weight of up to 5.0 tonnes, the rate of improvement has been far weaker in 2015. The CCFA recorded a 2.0% y/y gain in registrations to 379,424 units, although it did benefit from an increase during December of 8.6% y/y to 39,874 units. It has been a mixed year for domestic OEMs in the LCV category as Renault Group recorded a gain of 5.0% y/y to 127,230 units, while PSA declined 2.9% y/y to 119,434 units. The performance of the French light-vehicle market – and notably the passenger car sector – has improved robustly compared to 2014. This will be partly as a result of the normalization process after the almost record highs earlier this decade thanks to the various incentives offered by the French government to prop up the market followed by a combination of payback from the generally challenging economic conditions in the region. Its performance is underlined by France's macroeconomic situation. Its economy grew 1.0% during the first three quarters of 2015 and although improvement is expected in the fourth, it is anticipated to be weaker as a result of the effects of the terrorist attacks and lower energy consumption due to unseasonably mild weather. The registration figures during 2015 have also been helped by the use of tactical sales – registrations by OEMs, dealers and rental fleets – which has helped matters. This is likely to have happened in December again as dealers looked to meet annual sales targets by pre-registering some vehicles. Nevertheless, some of the large gains in December 2015 are also likely to have come from new models. Renault is likely to have been a big beneficiary in this area thanks to the introduction of the Espace, Kadjar and Talisman. It could also be lifted by the first of the fourth-generation Méganes which are now hitting the market. This is likely to carry the automaker during 2016 as well. Looking forward, the recovery will accelerate only modestly during 2016. Activity will be boosted by muted inflation, a weak euro, loose monetary conditions, improving confidence levels, and gradually easing credit conditions. In addition, the draft 2016 budget includes a further cut in income taxes worth EUR5.0 billion. It is estimated that this measure will benefit 12 million households. At the same time, the budget also incorporates policies to support business. The social solidarity contribution (contribution sociale de solidarité des sociétés: C3S), currently paid by around 300,000 companies, is projected to be eliminated in 2017. All in all, measures aimed at helping businesses will total EUR33 billion in 2016. Nevertheless, the recovery still faces many headwinds that will limit the recovery over the medium term. In particular, the labor-market situation will remain difficult, although we expect some stabilization in 2016. Nevertheless, growth will not be strong enough to make a significant dent in France's elevated unemployment rate. Employment creation will also be limited by structural factors, such as elevated non-wage labor costs and employment protection legislation. IHS expects growth to average 1.2% in 2016 after an increase of 0.2% during 2014 and an anticipated increase of 1.1% in 2015. Overall, IHS Automotive anticipates improvements in light-vehicle sales during 2016. We currently expect passenger car registrations to increase by over 3.5% y/y and LCV demand to grow by around 7.5% y/y during 2016. Despite the upward trend of the market, the dynamic of the passenger car market with regards to fuel type will continue to undergo something of a transition as the French government puts even greater pressure on phasing out the benefits for buying a car with a diesel powertrain. According to the latest data published by trade association CCFA, the proportion of total diesel passenger car sales in 2015 has fallen to 57.2% of the market compared to 63.9% in 2014, while gasoline (petrol) passenger car registrations have increased from 33.0% to 38.6%. There has also been an increase in share of hybrid and electric vehicles (EVs). The pressure will further ratchet up as the French government improves the parity between the two key fuel types by changing the tax applied to them.
