Features
27 mar 20

COVID-19: economic slowdown could destroy new car sales demand

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Global market analysis provider IHS Markit prepared a series of findings on the coronavirus impact on the global automotive industry. Their takeaway: there’s a lot of bad news and government action is key.

Across the world, an increasing number of countries have implemented drastic measures to contain COVID-19. The United States has also started doing so.

The car industry, already under pressure before the coronavirus broke out, is now facing one of the biggest challenges in many years. Across virtually all regions, the latest IHS Markit forecast release includes downgrades.

China is slowly bringing facilities back online and the focus is shifting from an issue of production and supply to one of demand, as the broader impact of the coronavirus widens. “Virtually every territory faces the prospect of some degree of demand distortion in the coming months,” said a spokesperson for IHS Markit.

Worldwide, the car industry is expected to go through an unprecedented and almost instant stalling of demand this year. Global car sales could plummet more than 12% from 2019 to 78.8 million units, predicts IHS Markit. That figure is 10 million units lower than the pre-coronavirus forecast made in January 2020.

“A fall of 12% would be considerably worse than the two-year peak-to-trough decline of 8.0% during the global recession in 2008/2009,” commented the spokesperson.

A sharp reduction in near-term growth can be expected but glimmers of hope are emerging for China. However, the risk that the virus flares up in the coming months could throw a spanner in the works.

For 2020, IHS Markit predicts sales to post 22.4 million units, down close to 10% compared to the previous year. Importantly, the scale of the economic slowdown could destroy some demand.

Forecasts for Europe are down by 13.6% over 2019, as the continent is gripped by a full-scale coronavirus outbreak and demand conditions worsen by the day.

For the US market, IHS Markit fears the announced monetary and fiscal policy measures will not suffice to save the car market from a looming demand slump. US car sales are forecast to drop to 14.4 million units, down by at least 15.3% year-over-year and 2.4 million units fewer than earlier forecasts.

According to IHS Markit, government action is key, both to control the virus and to provide support and stimulus packages to help economies through the healing process. Though not mentioned by the analysts, relaxing containment rules prematurely is most likely counterproductive to achieving this process.

Image copyright: Shutterstock

Authored by: Benjamin Uyttebroeck