London-based IHS Markit, which has a Southfield office, downwardly revised its forecasts for global light vehicle sales and production in light of the COVID-19 pandemic. Global light vehicle sales now are forecast to be 69.6 million units this year in the wake of the pandemic, while production is expected to fall to 69.3 million units.
The drop in 2020 sales is 22 percent lower than in 2019, with risks to the forecast still skewed to the downside.
“The pandemic remains a clear and present danger to the autos sector, with months of uncertainty expected to cloud hopes for global recovery prospects,” says Colin Couchman, executive director of global autos demand forecasting at IHS Markit. “The expected cycle of decline, stabilization, and recovery for autos varies by market, reflecting variations in containment strategies and policy responsiveness.”
North America is forecast to see sales drop 26.7 percent year over year in 2020. In the U.S., a consumer-led recession looks inevitable for the year as demand slumps. There is no national consistency on rules relative to sales activity or duration for stay home orders. There remains risk of another increase in infections, which could result in another wave of state or local-level restrictions, changing the dynamic again. IHS Markit expects that the known monetary and fiscal measures are not enough to prevent a collapse in auto sales, and in 2020, the U.S. market sales forecast is 12.5 million units.
Mainland China is seeing the beginnings of recovery. The IHS Markit forecast for Greater China sales in 2020 sees volume at 21.4 million units, a drop of 15 percent from 2019 levels. Government incentives could help underpin a more orderly recovery profile, but they are not yet indicated. Nearly all dealers are back to work, and there are signals of an uptick in showroom traffic, but consumer confidence remains weak. Auto demand in the country could still bottom out midway through 2020 and begin to recover in the second half of the year. In 2021, volume could recover to 23.2 million units based on current forecasts.
In Europe, COVID-19 lockdowns remain in place in Italy, Spain, France, and the U.K. but show signs of easing in Germany. Prior to the pandemic, Europe had already faced uncertainty on the CO2 fleet target timetable as well as U.K. and European Union trade talks. Europe will see mixed recover cycles as a result of local restrictions across the region, and recovery strategies are a work in progress. The forecast for Europe is a 24.6 percent drop in sales to 15.5 million units.
Affected by stay home orders and expected weak demand, global light vehicle production is expected to drop to 69.3 million units in 2020 – a decline of 19.6 million units from 2019.
Production remains essentially shuttered in Europe and North and South America, but China has resumed. Shuttered automakers are developing production re-start plans, factoring in social distancing, virus testing, and provided personal protective equipment. Global manufacturers can take best practices and lessons learned from re-starting in China to other markets.
The primary driver of the latest outlook for greater China includes delayed and slow resumption of operations in the Hubei province. Output is forecast to drop to 20.9 million units in 2020, compared with 24.7 million in 2019. The pandemic in Europe may create a shortage of key components for production in China. Similar risks for Japanese OEMs in China exist as well, as facilities for semiconductors and other components have been shut down. Despite the modest improvement in the pace of production in the summer, demand is expected to remain low given the broader global macroeconomic conditions.
In Europe, expectations for declines in production will impact essentially all OEMs as plants have been shuttered. Some plants are resuming production in late April, and others will open in early May, all under a fairly slow ramp-up scenario. The deterioration in the macroeconomic outlook and the broad COVID-19 containment measures have resulted in material reductions in the demand outlook. Production is forecast to drop to 15.9 million units, compared with 21.1 million in 2019.
In North America, IHS Markit forecasts further deterioration relating to the COVID-19 crisis and its impacts on U.S. auto sales. The 2020 forecast reflects a nine-week shutdown across the region with production for most plants expected to resume beginning the week of May 18. April production is projected at about 4,300 units, marking the lowest monthly production level since 1945 following the end of World War II. Production is expected to return at a gradual pace with reduced shifts and continue to ramp up through the second quarter. The forecast also reflects manufacturers using summer shutdowns to assess inventory and demand, making additional plant adjustments to ensure worker safety and resuming maintenance and retooling efforts where needed. The latest IHS Markit forecast sees North American production dropping to 12.2 million units, from 16.3 million in 2019.
In Japan, lost volume related to the COVID-19 outbreak will reach more than 400,000 units by the end of June as the Japanese government announced extended lockdowns in various parts of the country. Full-year 2020 Japan production is expected to decline by 20.4 percent year over year to 7.3 million units. In South Korea, automakers have been operating normally since the fourth week of February. However, production adjustments are expected in the second and third quarters due to reduced demand. Export demand from Europe and the U.S., which accounts for more than 60 percent of total exports from South Korea, has been materially downgraded, resulting in a full-year 2020 South Korea production at 3.2 million units, declining by 16.7 percent relative to 2019.