Europe’s car market expands by 11% in January on back of pent-up demand

Passenger-car deliveries in Europe gained 11% in January as automakers like Volkswagen AG and Stellantis NV fed off order backlogs and demand for electric cars recovered.

New vehicle registrations rose to 1.02 million units last month, the European Automobile Manufacturers’ Association said Tuesday. Fully electric vehicles made up 11.9% of total deliveries, up from 10.3% a year ago as automakers seek to reboot purchasing amid a bruising price war.

While carmakers continue to benefit from healthy order books, recovering to pre-pandemic levels will get more challenging this year. Economies are slowing in Germany, the UK and France, the region’s three biggest car markets respectively, adding to consumers’ concerns as they struggle with high borrowing costs.

‘The reversal of a trend of demand exceeding supply — which has persisted since the second half of 2020, pushing pricing and profit margin higher — is a key industry risk this year as vehicle output normalizes and orders soften,’ Bloomberg Intelligence analysts Michael Dean and Gillian Davis said in a note.

According to Bundesbank president Joachim Nagel, Germany’s economy may shrink slightly in the first quarter, while France on Sunday lowered its economic forecast and now expects just 1% growth this year. The UK slipped into a recession during the second half of last year.