The French car market is a largely home grown affair. The three main French brands, Peugeot, Citroën and Renault consistently outsell those from abroad and Renault’s finance arm and two of the biggest banks
in the country, BNP Paribas and Société Générale, represent the largest automotive finance providers, according to Leaseurope’s 2012 rankings.
Furthermore, as cars from French brands are nine of the top ten most sold cars in the country, Banque PSA Finance, the finance arm of PSA Peugeot Citroën, is also likely to be competing at the same level as RCI, however at present it does not submit finance figures to Leaseurope to verify this.
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But the French car market, and, therefore, the four monolithic companies at its heart, are experiencing some tough times.
As consumer confidence improves in the rest of Europe and motor finance levels begin to return to growth, albeit not especially healthy growth, France’s car sales are experiencing worse-than-average downturns.
In 2013 the number of car registrations in France fell by more than 5.7% to below
1.8 million vehicles, the lowest level since 1997. At the same time the figures across 27 of the 28 EU members fell by just 1.7% as the market began to show signs of recovery in private car sales.
This was the second year of significant falls in car sales in what had been the
second-largest market in Europe. In 2012 the market fell by over 8%, taking sales below two million units for the first time since 1999.
While the market has been turbulent across all of Northern Europe, even for the powerhouse of the German car market, there have been welcome signs of recovery. Both the German and Dutch markets have slowed their declines and predictions are that the market will grow in Germany in 2014. The UK market experienced significant growth in 2013 and, despite warnings of a slowdown, figures for 2014 show the pace of growth remains rapid.
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By GlobalDataIn contrast, France has shared a similar fate to southern European markets, where the economies have been harder hit by
austerity and declines caused by the financial crises since 2008.
The peaks and troughs of car sales data has been largely mirrored in the new car finance market over the same period. Just under 305,000 vehicles were financed in 2013, a near 25% drop from the high of 2010. As with car sales, 15% of the fall in financing happened in just one year, between 2011 and 2012, but the falls since then have been higher than the registration figures (8%), marking a significant fall off in penetration rates in the finance industry.
The value of the finance did, however, improve in 2013, even though only fractionally, to 3.369bn (£2.77bn) from 3.363bn in 2012, which for the first time since 2008 makes a break from the link between the two statistical trend lines. The cause for this is unclear as the type of vehicles being financed remains broadly similar, with all but one of the ten biggest selling vehicles in 2013 being superminis from the three main French manufacturers, much as they have been for the past four years. What’s clear is that since 2011 the type of finance sought by French consumers is changing, with leasing becoming a growing source of finance taking over from loans and other finance products.
Types of leases
Since 2010 the value of lease purchase agreements has grown by 10.3% to 2.38bn and non-purchase leasing has leapt by nearly 61%. The latter showing the sort of growth the UK has seen with PCP over a similar period.
Such growth figures indicate that the average French consumer remains unsure about the future with the option of returning a car becoming a more important consideration that the potential of owning a car long term.
This is partly supported by the condition of the French economy over the same period which, while showing modest growth overall in GDP, has been experiencing a stagnating jobs market and falling consumer confidence, which, according to INSEE, the national statistics office of France, fell to a five-year low in the autumn of 2013.
Economists at Timetric, Motor Finance’s parent group, note that private consumption in France contracted by 0.2% in 2012 owing to a deceleration in disposable income and fiscal austerity measures, and that predictions for 2013 made that year were not rosy, with expectations of further contractions in the economy.
Consumer car financing, therefore, was hit hardest not by a sharp rise in interest rates or any specific taxation in France but, largely, by a fall in consumer confidence. The lack of consumer confidence and a stagnated job market do not completely explain the French finance industry’s problem, but go a long way towards doing so.
Not as bad as it first appears
New car financing rose by 3.2% between December 2008 and the end of 2009, aided by a significant 12.3% rise in new car registrations. By comparison, the UK new car sales market dropped by 6.4% in 2009. This was despite a fall in French GDP of 1.7% and consumer confidence being consistently below 2011 levels.
The significant difference between 2009 and 2012 was that in January 2009 the previous centre-right government of Nicolas Sarkozy introduced a generous scrappage scheme which could pay out as much as 5,000 (£4,139) for a 10-year-old vehicle. This scheme helped push 2009 to a record year for car sales.
Finance, as noted above, did not do so well in the first year of scrappage, perhaps predictably, but recovered after the scrappage scheme stopped as confidence, and car purchasing, remained buoyant. Finance amounts actually increased by 8.6% between 2009 and 2011 despite registrations sliding downwards.
The fall was not as dramatic as an observation of one year, 2012, would have the casual observer believe, however. The single year fall in the value of financing extended to French consumers in 2012 was dramatic, but largely based on an artificially heightened demand. The fall, when 2012 is compared to 2008, is 7%. This figure is roughly in line with the UK’s fall of 6% in the first year of the credit crisis.
The important factor for French finance is that this happened later than in most world markets, and as the rest of the European market looks set to recover, France’s remains in a slide.
The decline appears to be restricted only to new car financing. In the used car sector the finance market is performing differently and in more encouraging ways. 2013 showed a growth in the value of finance extended for used cars, the second consecutive year of growth, and the number of used cars financed has effectively stabilised with an almost insignificant drop of 0.67% in cars financed.
The used car figures are positive for the French motor finance markets as traditionally used car purchases outnumber those of new, unlike in Spain where the new car is king.
The car finance market can hope, therefore, that the stable used market can tide them over until the more lucrative new market picks up again. Only then can the French car market hope to recover to become, once again, the second-largest market in Europe.
