Industry Trend Analysis - Commercial Vehicles To Ride Investment Uptick - JUNE 2017

BMI View: A strong macroeconomic environment conducive to business investment will mean commercial vehicle sales outperform passenger car sales in Belgium in 2017. Passenger cars will still perform strongly, however, thanks to low borrowing costs, low unemployment and rising confidence.

A strong start to new vehicle sales over Q117 and an improving near-term economic outlook have prompted us to revise our 2017 sales forecasts for Belgium upwards this quarter. We are now forecasting a 9.6% increase in new vehicle sales (up from 4.7% previously), with commercial vehicle (CV) sales (13.7%) to outperform passenger car sales (9.0%).

Commercial Vehicles Leading The Charge
Belgium - Vehicle Sales By Type, Units & % chg y-o-y
e/f = BMI estimate/forecast. Source: BMI, FEBIAC

We project that CV sales will show stronger growth over the current year thanks to a more supportive macroeconomic environment for businesses. Our Country Risk team now believes that the risks to our economic growth forecasts - of 1.4% GDP growth in 2017, rising to 1.5% in 2018 - are tilted to the upside. Moreover, with the global economy on the upswing, we believe that the external environment should be better-than-expected for Belgium's export sector, at least for the first half of the year. This improving macroeconomic backdrop will mean that Belgian businesses will look to increase the amount they are spending on fleet renewal across 2017, thereby increasing demand for CVs. This view already appears to be playing out in Q117 with light commercial vehicle sales having grown by 17.4% and heavy truck sales having risen by 5.5%, while bus sales rose by 18.6% ( see chart below).

LCV And Buses Lead With Double-Digit Growth
Belgium - CV Sales, Units (LHS) & % chg y-o-y (RHS)
Source: ACEA, BMI

Though we forecast CVs to outperform, we still maintain that Belgium's consumer-friendly macroeconomic environment will see the passenger car segment post comparatively strong growth rates as well. Three key factors support this view. First, the low interest rate environment across the eurozone will continue to feed into attractive auto financing rates for Belgian consumers. Second, relatively low unemployment and low inflation are further positives for the passenger car sector over the near term. Third, a slowly-improving economy could also start to bolster consumer confidence and household spending. With this positive combination of factors, the Belgian market has already shown strong Q117 performance with sales figures from the European Automobile Manufacturers Association (ACEA) showing passenger car sales expansion of 9.5%, to 164,709 units.