Double Digit Expansion For Romanian Vehicle Sales As Scrappage Scheme Shores Up Demand

Fitch Solutions / Autos / Europe / Tue 06 Sep, 2022

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Key View

  • Demand for new vehicles in Romania will remain robust in 2022 and in the medium term as higher than average economic output versus EU regional peers will support demand for high value goods such as cars.
  • EV sales will benefit from one of the highest incentive structures globally as individuals are subsidized to opt for zero-emission vehicles while replacing their older cars via the Rabla Classic and Rabla Plus scrappage scheme.

We at Fitch Solutions believe total new vehicle sales in Romania will return to growth in 2022 following two years (2020-2021) of contracting sales as economic output remains robust in a post-Covid and higher inflation economic backdrop. The Rabla Classic program, which has been ongoing since 2004 in varying degrees of implementation has been and will continue to be a source of demand for new vehicles in Romania. This will also be supported by the Rabla Plus program, an electric vehicle (EV) incentive scheme which also serves as a scrappage scheme but with EVs replacing older vehicles and we believe it will contribute to support new vehicle demand in Romania.

According to the National Institute of Statistics, Romania recorded a 5.3% increase in GDP in Q222 y-o-y and a 2.1% increase on a q-o-q basis. Similarly, vehicle sales in H122 surprised to the upside expanding by 16.5% y-o-y to reach a total of 68,789 units. As a result, we have revised our 2022 total vehicle sales forecast higher as we now expect sales to rise by 12% and reach 160,000 units. This is in contrast to our previous forecast of a 6.7% decline, although we expect sales to remain below pre-pandemic highs of 184,982 units. Sales will be driven by robust demand for passenger vehicles (PVs) amid the extension of a vehicle scrappage scheme aimed at replacing Romania’s old vehicle fleet as indicated by the strong demand in y-t-d figures. We now forecast the PV segment to rise by 15% with sales expected to reach just shy of 140,000 units. The strong total vehicle sales figures for the H122 period were driven by a thriving PV segment that rose by 23.1% to reach 58,712 units. In contrast, the commercial vehicle (CV) segment witnessed contracting sales thanks to low demand for light commercial vehicles (LCVs) which fell by 17.1% y-o-y to reach a total of 6,544 units in H122 leading the overall CV segment to decline by 11.2% y-o-y.

Robust PV Demand To Lift Overall Sales Higher In 2022`

Romania - Vehicle Sales By Segment (2019-2023)

f = Fitch Solutions forecast. Sources: ACEA, Fitch Solutions

The average age of Romania’s PV fleet, which sits at 16.9 years, is the second oldest in the EU bloc which averages around 11.9 years and is just ahead of Lithuania (17 years). The government, through its Rabla Classic and Rabla Plus programs has aimed to reduce the number of older vehicles in use and promote the use of EVs by offering cash incentives to replace older vehicles. This scrappage scheme has been helpful in supporting demand for new vehicles, however used vehicle imports continue to flow into the country unabated especially as lead times for new vehicles have risen over the last two years as a result of the chip shortage that has increased waiting times and the reduction of available models.

Romania Has One Of The Oldest PV Fleets In Europe
Europe – Average PV Fleet Age In Years (2020)
Source: ACEA Vehicles In Use Report 2022

The scrappage scheme, which was revised in February 2022 and will span a period of two years, now offers additional funds if two vehicles are scrapped with the intention to replace with a new car. As it stands, individuals and businesses are eligible for a RON6,000 (USD1,236) cash voucher for one scrapped vehicle and RON9,000 (USD1,854) if two vehicles are scrapped. The replacement vehicle should not have tailpipe emissions exceeding 160g CO2/km and an eco-bonus of RON1,500 (USD309) is on offer if the scrapped vehicle is older than 15 years and has a Euro 3 emission standard or lower. Furthermore, replacement vehicles that have emissions lower than 120g CO2/km receive an additional RON1,500 (USD309) eco-bonus.

The Rabla Plus program also serves to extend the incentive to promote EVs in the country by offering an additional RON51,000 (USD10,507) for battery electric vehicles (BEVs) and RON26,000 (USD5,357) for plug-in hybrid electric vehicles (PHEVs) with emissions equal to or lower than 80g CO2/km and RON29,000 (USD5,976) for PHEVs if two cars are scrapped. The EV market remains strong in 2022 so far as BEV sales have expanded by 410% y-o-y to reach 4,460 units in H122, representing around 6.48% of total sales. We currently forecast 2022 BEV sales to rise by 55.2% with sales expected to reach 9,731 units. Indeed, these incentive levels have been aggressive and has resulted in EV sales experiencing a dramatic increase over the last few years and we believe will continue to provide upside to Romania’s EV adoption levels.

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2021 Fitch Solutions Group Limited. © Fitch Solutions Group Limited All rights reserved. 30 North Colonnade, London E14 5GN, UK.

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