2014 has proved a positive year for new vehicle sales within Estonia. Over the first nine months of the year, passenger car (PC) sales were up by 5% year-on-year (y-o-y), at 15,874 units, according to figures from Estonia's association of car dealers and service companies (AMTEL). September's monthly performance was highly impressive, up 19% y-o-y, at 1,841 units for the month.
On the commercial vehicle side, 8M14 figures from the European Auto Manufacturers Association (ACEA) show a total of 1,884 light commercial vehicles (LCVs) sold in country, with a further 508 medium and heavy commercial vehicles sold, plus a further 79 buses, for a total of 2,471 units sold year-to-date.
Adding the 2,471 CV units to the 14,033 PCs sold over 8M14 makes for a total new vehicle market of 16,504 units. On current sales trends, this leaves the Estonian new vehicle sales market on target to hit BMI's forecast of 25,471 units for the full year.
Looking forward, BMI's Country Risk team believes that Estonia's economy has now turned the corner and will post relatively strong real GDP growth over the next two years. Robust private consumption growth resulted in real GDP growth reaching 2.4% y-o-y in Q214, while the reading for Q114 was revised up substantially, from -1.9% to 0.4%% y-o-y due to an alteration to the statistical agency's methodology. Consequently, in September, we revised up our 2014 real GDP growth forecast from 0.9%, to 1.8%.
Turning to private consumption, a key indicator of the potential demand for new vehicles within Estonia, we hold to our view that household spending will remain the primary driver of Estonian real GDP growth over the course of 2015 and into 2016. Strong private consumption in 2014 has been driven by nominal wage growth (declining but still positive) as well as consumer price deflation (-0.2% y-o-y in August), both of which have contributed to improving households' purchasing power. This will see household spending contribute 1.9 and 1.8 percentage points (pp) to headline growth in 2015 and 2016.
Moreover, against a backdrop of subdued inflation, the European Central Bank (ECB) looks set to keep interest rates at very low levels (the current lending rate was cut to just 0.05% in September 2014 and the deposit rate was cut to -0.2%), which should in turn lead to lower car financing rates and act as a support to Estonian new vehicle demand over the near term.
Against this backdrop, BMI is currently targeting a further 2.6% annual increase in new vehicle sales for 2015, with commercial vehicles (+13.6%) set to perform more strongly than passenger cars (+0.5%). However, passenger car sales will continue to account for the majority of new vehicles sold within Estonia.
Over the full forecast period to 2018, BMI is currently forecasting 8.6% growth in new vehicle sales, to reach around 29,400 units sold per annum. This would still, however, represent a decline from the market's 2007 peak.
In 2013, a total of 23,189 vehicles were sold in Estonia, representing annual growth of 14.5% on 2012's figures. Breaking down the headline figure, a total of 19,500 passenger cars were sold in country, plus 3,689 commercial vehicles.
As of end-September 2014, Japanese automaker Toyota remains the dominant player within the Estonian passenger car segment, selling 2,206 units for a market share of 13.7%.
In second place is Skoda, which sold 1,587 units for a market share of 9.9%, followed by its parent company Volkswagen (VW) on 1,322 units (8.2%).
The Top 10 is split fairly evenly between European (5) and Japanese (4) manufacturers, with Kia the sole Korean manufacturer within the Top 10 (in eighth position).
In terms of the top-selling models within Estonia, Skoda's Octavia is the top-seller, followed by the Honda CR-V and the Nissan Qashqai. Toyota's Auris, Avensis and RAV-4 models are also popular.
Used cars continue to account for the lion's share of cars purchased within Estonia. In particular since the financial crisis of 2008, Estonian consumers have tended to opt for cheaper imported used cars that have entered the country primarily from elsewhere in the European Union. According to a June 2013 article in the Baltic Course, Estonia's car fleet has an average age of 13.5 years, compared to an EU average of 7.8 years.
However, one encouraging trend is that the amount of new cars being imported into Estonia has been rising steadily since 2010. This fact, coupled with the fact that Estonia's national vehicle fleet is ageing, could see further support given to new car sales as we move into 2015.
This report also contains fully updated Company Profiles (including SWOT Analysis) for Amserv and Inchcape, two of the leading dealerships within Estonia.