Global light vehicle sales are forecast to be down 22 percent to 70.3 million units this year in the wake of COVID-19, according to the most recent analysis from IHS Markit, a business information provider with an office in Southfield. Regional forecasts have been impacted substantially, and impacts are being felt as facilities across key regions remain closed, while recovery begins in others.
In the U.S., the light vehicle market is expected to decline 26.6 percent from 2019 levels to 12.5 million units this year, according to the latest IHS Markit forecasts. This is on the heels of a rough first quarter as COVID-19 began to impact key states and stay home orders have prevented dealers from a traditional sales effort with closed showrooms.
Online sales are allowed in most states, but declines have been substantial, and inventories remain high. April and May sales are forecast to be historically low, as forecasters assume restrictions will continue in much of the country. In comparison, the lowest monthly selling pace in recent history was an 8.8 million unit reading in December 1981.
“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,” says Colin Couchman, executive director of global autos demand forecasting at IHS Markit. “Market fortunes are expected to be mixed, as delayed and destroyed demand interacts with massive global supply disruption.”
Most factories in China are back to work, but IHS Markit forecasters say 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. The pace of production has also been adjusted to align with inventory and demand levels. April forecasts reflect extended downtime and staggered resumption patterns.
Mainland China is expected to have a sales decline of more than 15.5 percent year-over-year to 21 million units with concerns on secondary impacts from the global contagion, which could further disrupt the recovery. While nearly all dealers across mainland China are back to work, and there are signs of an uptick in showroom traffic, consumer confidence remains fragile. So far, 12 cities have introduced various incentives to spur sales, including new energy vehicle subsidies, scrappage incentives, and increased license plate quotas. As in other parts of the world, the industry awaits clarity on any prospects for government sponsored auto incentives.
Regional impacts will vary as the virus runs its course and consumer confidence is tested. IHS Markit predicts a disorderly and jagged recovery profile across the world as governments, consumers, and businesses struggle to interpret prevailing market conditions.
Across western and central Europe, IHS Markit forecasts a 24.9 percent drop in light vehicle sales to 13.6 million units for the year. European markets will experience mixed recovery cycles based on local restrictions and guidance along with varied economic support and stimulus provision.
COVID-19 lockdowns remain in place across Europe, especially in Italy, Spain, France, and the United Kingdom with dealerships closed. The timetable for ending lockdown restrictions varies, with some countries considering extending provisions while others have revealed cautious exit strategies. Markets to watch for grassroots of recovery include Germany, Denmark, Austria, and the Czech Republic.
Across Europe, the return to work is varied with some auto manufacturers making preparations for a gradual return to production beginning this week, and some already underway. However, component supply remains critical to restart operations. In countries including France and the United Kingdom, government advice prevents meaningful activity until the beginning of May at the earliest.
Global light vehicle production is expected to drop 21.2 percent due to COVID-19 – an 18.8-million-unit decline over 2019, according to the latest IHS Markit forecasts. The biggest disruption is expected to hit in the first half of the year, with output in the first quarter expected to be down by 24 percent year-over-year and in the second quarter by 44 percent as lockdown measures intensify. The balance of the year is forecast to ease, but overall, the second half of the year is expected to be down by nearly 8 percent, compared to an overall decline of 35 percent in the first half.
In North America, the forecast reflects shutdowns in production from mid-March through early May, at a minimum. In those nine weeks, an estimated 2.75 million units will have been lost, with risk of further extensions as the virus continues to impact regions across the country.
U.S. production across 14 states accounts for 66 percent of total North American light vehicle production with 46,000 vehicles produced every day before the outbreak. Concern surrounds the state-by-state ending of stay home orders that could result in a patchwork of factories returning to work. Due to the tightly integrated supply chain across the U.S. and throughout North America, restarting of vehicle assembly requires coordination across the states along with Canada and Mexico.
Japan continues to display heightened downside risks as the state of emergency takes hold. Until now, OEM operations have typically been subject to short, frequent downtime actions, often tailored to individual assembly lines or vehicle programs. As the domestic situation deteriorates and exports are severely reduced, the actions could become more widespread.
“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,” says Mark Fulthorpe, executive director of global automotive production forecast for IHS Markit. “We might expect varied return to work cycles and shift patterns, as well as stronger health guidelines, including checks for those returning to work.”
IHS Markit is headquartered in London.