Global car sales forecast to fall 22 per cent

GLOBAL light vehicle sales are forecast to plummet 22 per cent to 70.3 million units this year as a direct result of the industry turmoil caused by the COVID-19 pandemic, according to data and analytics firm IHS Markit.

In its most recent study released on April 21, IHS said the United States would lead the downturn with sales expected to decline 26.6 per cent this year to 12.5 million units.

The western and central Europe region is forecast to follow closely behind with a 24.9 per cent hit, to 13.6 million units, while the world’s biggest market, China, is expected to fall 15.5 per cent, to 21 million units, with its early recovery potentially disrupted by secondary impacts from the global contagion.

“The unexpected and sudden nature of the impacts of the pandemic are hitting the autos sector hard, with unprecedented levels of uncertainty around prospects for meaningful global recovery,” said IHS Markit’s executive director of global autos demand forecasting, Colin Couchman.

“Market fortunes are expected to be mixed, as delayed and destroyed demand interacts with massive global supply disruption.”

Naturally, regional impacts will vary as the virus runs its course and consumer confidence is tested, with IHS Markit predicting “a disorderly and jagged recovery profile across the world as governments, consumers and businesses struggle to interpret prevailing market conditions”.

In the US, April and May sales are expected to be historically low, according to IHS Markit analysis, with forecasters assuming restrictions on people’s movement and business operations in key states will continue, preventing dealers from trading in a traditional manner and keeping many showrooms closed.

As GoAuto has reported, the White House has only just declared that vehicle sales are considered an essential service that should remain fully operational during the pandemic, however shutdown and stay-at-home orders remain the responsibility of individual states and other local jurisdictions.

There are positive indicators emerging out of Europe, both in terms of COVID-19 cases flattening out and the auto industry returning to work, however IHS Markit says the recovery cycle will be mixed across the various markets “based on local restrictions and guidance, together with varied economic support and stimulus provision”.

As lockdowns remain in place across the continent, most notably in Italy, Spain, France and the UK, governments are taking different approaches to the ongoing crisis, ranging from extending provisions to announcing cautious exit strategies.

IHS Markit says the countries to watch for early signs of recovery include Germany, Denmark, Austria and the Czech Republic.

Although most car factories in China have reopened, IHS Markit forecasters caution that “it will take time for plants to fully recover, especially as revised COVID-19 working practices make it virtually impossible to rebound to previous operational capacity, among weakened demand conditions”.

“While nearly all dealers across mainland China are back to work, and there are signs of an encouraging uptick in showroom traffic, consumer confidence remains fragile,” the firm said.

“So far, 12 cities have introduced various incentives to spur sales, including New Energy Vehicle subsidies, scrappage incentives and increased licence plate quotas.

“As in other parts of the world, the industry awaits clarity on any prospects for government-sponsored auto incentives.”

In terms of global light vehicle production, IHS Markit is forecasting a 21.2 per cent downturn this year to around 71 million units due to COVID-19, which is equivalent to 18.8 million units over 2019. This is in line with forecasts made by other analysts such as LMC Automotive.

Most of the hit is expected to be taken in the first half, with an overall decline of 35 per cent, based on a 24 per cent downturn in the first quarter and a 44 per cent plunge in the second quarter as lockdown measures have intensified.

“The balance of the year is forecast to ease, but overall the second half of the year is expected to be down by nearly eight per cent,” IHS said.

Although back at work, factories in China have reportedly adjusted output to align with inventory levels and degraded consumer demand. Staggered resumption patterns are also coupled with ongoing supply chain disruptions.

As reported, some European car-makers including Volkswagen and Mercedes are also now reopening production facilities, however IHS Markit notes that the return to work is varied and that component supply could impede progress and in some countries, such as France and the United Kingdom, “government advice currently prevents any meaningful activity until the beginning of May at the earliest”.

The forecast for North America is based on shutdowns that occurred from mid-March and will continue until at least early May – a nine-week period in which IHS Markit expects the industry will have lost an estimated 2.75 million units, “with risk of further extensions on the horizon as the virus continues to impact various regions around the country”.

“US production across 14 states accounts for 66 per cent of total North American light vehicle production with 46,000 vehicles produced every day before the outbreak,” the firm said.

“Concern surrounds the state-by-state ending of stay-at-home orders that could result in a patchwork of factories returning to work.

“Due to the tightly integrated supply chain across the US and throughout North America, restarting of vehicle assembly requires co-ordination across the states along with neighbouring Canada and Mexico.”

Japan, which is the biggest source of vehicles for the Australian market, remains a market to watch as its state of emergency takes hold, – much later than most other countries – described IHS Markit as displaying “heightened downside risks”.

Downtime actions are expected to move from short movements often tailored to individual assembly lines or vehicle programs to a more widespread shutdown “as the domestic situation deteriorates and exports are severely reduced”.

IHS Markit’s executive director of global automotive production forecast, Mark Fulthorpe, said: “Overall, as manufacturing begins to recover, workforce safety measures will be key and will impact production levels as OEMs define a new normal for their work environments, keeping social distancing in mind.

“We might expect varied return to work cycles and shift patterns, as well as stronger health guidelines, including checks for those returning to work.”