New vehicle sales have got off to a strong start across the first half of 2014, rising by 8.3% year-on-year, to reach 114,037 units, according to figures from the Danish Car Importers Association - De Danske Bilimportører (DBI). For the full year, BMI believes that this strong growth can be maintained, targeting an increase of 10%. Breaking down the headline figure, passenger car sales stood at 98,800 units, or 86.6% of total sales over H114, with commercial vehicles and buses making up the remaining 15,237 units (13.4% of total).
Our optimistic view on the Danish new car sales market is driven by a variety of factors. First, BMI's Country Risk team is expecting real GDP growth to accelerate to 1.3% and 1.6% in 2014 and 2015 respectively, up from just 0.4% in 2013, on the back of a broad based improvement in domestic and external demand.
Encouragingly for the near-term outlook for domestic auto sales, we believe that the outlook for private consumption - a key indicator of the potential demand for new cars - is also positive. Consumer confidence is currently standing at multi-year highs, bolstered by the continued gradual recovery in house prices following the 2008 crash and an increase in overall employment levels. This has led to rising retail sales. We are forecasting private consumption growth of 0.8% and 1.5% in 2014 and 2015 respectively.
Moreover, against a backdrop of subdued inflation (the Danmarks Nationalbank is forecasting annual Harmonised Indices of Consumer Prices inflation of just 0.6% in 2014, rising to 1.6% in 2015), interest rates should remain at very low levels (current lending rate is 0.2% and deposit rate is 0.05% as of June 2014), which should in turn lead to lower car financing rates and act as a support to Danish new vehicle demand over the near term.
One major challenge to new car ownership in Denmark remains the very high rate of tax levied on new car purchases. There is an effective 180% tax on all new car purchases (made up of...
The Denmark Autos Report features the latest data and forecasts covering production, sales, imports and exports.
Business Monitor International (BMI)'s Denmark Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on the automotives market in Denmark.
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