Industry Trend Analysis - External Growth Drivers Masking Domestic Weakness - FEB 2018

BMI View : Greece's automotive sales outperformed expectations and recorded strong growth for the first 10 months of 2017 . H owever , Greece's automotive sector is heavily dependent on external factors , such as exports and tourists , which will fluctuate in correlation with external demand changes .

Greece's automotive sector has shown strong recovery for the first 10 months of 2017 (10M17), due to its booming tourism industry and strong growth in its logistics sector. We have therefore revised up our growth forecasts for 2017 and 2018 following 11.7% growth in passenger vehicle sales and 20.3% growth in commercial vehicle sales for 10M17. Our forecast revisions are as follows:

  • Passenger vehicle sales (PV): from 3.8% in 2017 and 3.7% in 2018 to 8.3% and 7.3% respectively, and

  • Commercial vehicle sales: from 8.7% in 2017 and 2.5% in 2018 to 19.1% and 8.8% respectively. Breaking down our commercial vehicle sales forecast revision:

    • Light commercial vehicle sales (LCV): from 8.5% in 2017 and 2.3% in 2018 to 18% and 8.5% respectively, and

    • Heavy commercial vehicle sales (HCV): from 15.3% in 2017 and 4.9% in 2018 to 49.2% and 14.9% respectively.

Greece's Automotive Sector Recovery Making Headway
Greece - Vehicle Sales
f = BMI forecast. Source: National sources, BMI

Tourism Will Continue To Be A Boon For Light Vehicles

We believe that the significant influx of tourists to Greece as well as an uptick in road freight transport will be the primary growth drivers of Greece's automotive sector over our 2017-2021 forecast period ( see ' Tourists And Foreign Direct Investors Bolstering BoP Dynamics ' , September 1). Our Tourism team believes that tourist arrivals will grow by 8.8% in 2017 and continue to average 9.2% growth over our 2017-2021 forecast period. This will be the primary growth driver behind demand for PVs and LCVs as the consumer base will remain under pressure over this period and will not be the main source of demand ( see ' Tourism: The Lifeline For Greece's Automotive Sector ' , June 12).

Tourists Flock To Cheap And Safe Greece
Greece - Total Nights Spent, 12mma
Source: Eurostat, BMI

Road Freight A Boon For HCV

We believe that an increase in road freight, exports and a municipal fleet upgrade will drive HCV sales to outperform other segments in 2017 ( see ' Municipal Fleet Contributes To CV Recovery ' , September 6). Our Freight Transport & Shipping team forecasts road freight to increase 3.7% in 2017 and continue to average 3.4% over our 2017-2021 forecast period, which coupled with a 5.5% expected rise in goods and services exports in 2017 will drive demand for HCVs. For 10M17, HCV sales increased 65.7% and we expect growth to continue, albeit at a slower pace as pent-up demand is satisfied, to expand by 49.2% in 2017 and continue to average annual growth of 15.5% over our forecast period.

Road Freight Responsible For HCV Demand
Greece - Road Freight, Exports & HCV Sales
f = BMI forecast. Source: National sources, BMI

Our Country Risk team believes that Greece's recovery has strengthened in recent quarters and growth will accelerate further in 2018. However, robust external demand has been key to the recovery and as this fades, underlying domestic weaknesses will continue to dampen growth prospects ( see ' External Demand Masking Domestic Weakness ', November 24). We therefore highlight that the growth in Greece's automotive sector is generated from external demand and that if this external demand were to slow, it would have a large negative impact on the demand for new vehicles.