AN INDUSTRY RUNNING ON EMPTY
AS the United States becomes the country with most Covid-19 infections, the outlook for the global automotive industry is bleak. Credit rating agency Scope has been crunching the numbers and now predicts that the industry will contract by 16 per cent this year – that’s some 15 million vehicles.
Demand was slackening in China even before the coronavirus outbreak, and a tailoff also was becoming evident in the States after a few boom years. ‘Our credit outlook for the automotive industry remains negative and the expected deceleration of unit sales volumes in 2020 only strengthens this view,’ says Werner Stäblein, analyst at Scope.
‘We have updated our forecast for light vehicle sales (cars, SUVs, pick-up trucks) for 2020 to incorporate the effects of a further spread of the Covid-19 virus in the US, South America, and South Asia,’ Stäblein says.
‘We are now looking for a global drop of light vehicle sales of 16 per cent against our previous forecast from early March for a baseline 9 per cent decline yearon-year. We made the sharpest corrections in our forecasts for the US, Middle East and Africa, South America and the South Asia, while the European markets – western and central and eastern Europe – are still expected to drop most severely by around 22 per cent in 2020.’
Carmakers worldwide will struggle to cope with the shock of production shutdowns. BMW, Daimler (parent of MercedesBenz), Fiat Chrysler, Ford, PSA Group (Peugeot, Citroën, Opel), Renault, Nissan, Toyota, and Volkswagen temporarily closed most if not all factories in Europe. Consumer confidence also will take a hammering, with so many laid off or on emergency salary continuance by governments. Big-ticket purchases likely won’t be on the radar for quite some time.
The resumption of normal production could take months, after interruptions to the ‘just-intime’ process that sees parts inventory kept to a minimum – the entire supply chain has to be back on its feet before plants can start building cars again.
‘The pandemic crisis may become better and worse over multiple stages and the Covid-19 disease might be around in some shape for some time, leading to risks that supply chains remain vulnerable even if sales volumes pick up,’ says Stäblein.
Whatever way you look at it, the road ahead is rocky.