New car sales surged by 16.9% y/y to 9,436 units in October, thus accelerating from 7.3% y/y increase in September and reporting the fastest annual pace of increase since August 2018, the European Automobile Manufacturers’ Association (ACEA) latest figures published today showed. New passenger car registrations thus increased by 2.5% y/y to 85,854 units in the first ten months of the year as compared to the average 0.7% y/y fall for the EU in the period, which is positive news. If the robust car sales data are preserved also in November and December, we may expect household consumption to speed up in Q4.
Slovakia is the world’s largest manufacturer of cars per capita. Currently four car makers — Volkswagen, PSA, Kia Motors and Jaguar Land Rover (as of October 2018), operate in the country. Thus, the already high exposure of the economy to the automotive industry — it employs 280,000 people directly and indirectly, accounts for about 43% of the industrial production and 35% of the country’s industrial exports, is quite high. This makes the economy strongly vulnerable to developments in the car sector, especially in the EU and Germany in particular, which is the main destination for Slovak car exports. Even if demand for cars in the EU falls further going forward with the expected economic expansion slowdown and the effect from the uncertain Brexit and protectionist measures, domestic demand for cars may be expected to be preserved, at least for some time, thanks to the quite favorable labor market conditions and robustly growing wages, we think.