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Western Europe will be the hardest hit world region in terms of lost sedan and SUV sales because of the coronavirus with a 21% fall this year, while global sales will dip 14%, according to a report from ratings agency Moody’s Investors Service.
Consultants LMC Automotive expects a 15% fall in world so-called light vehicle sales to 76.6 million and said China, North America and Western Europe will all lose close to 3 million sales each in 2020. For Western Europe, where 14.3 million cars were sold in 2019, that is also a 21% fall. Western Europe includes all the big markets including Germany, Britain, France, Italy and Spain. If the impact of the virus continues well into the second half of 2020, global sales might fall over 20% to about 69 million, LMC said.
Moody’s expects a global sales rebound in 2021, depending on how the virus outbreak peaks.
“Western Europe will experience the steepest drop-off in demand with auto unit sales expected to slide 21% this year, sharply weaker than Moody’s previous forecast of a 4% decline. In China, auto unit sales will fall 10%, a steeper decline than the previous projection of a 2.9% drop,” Moody’s said in the report.
U.S. sales will fall at least 15% in 2020, weakening from the rating agency’s previous forecast of a 1.2% decline.
“A (global) sales rebound is likely in 2021, helped by an easier year-over-year comparison. But the strength of the recovery will depend in large part on how soon the coronavirus outbreak peaks in key markets and how quickly consumer sentiment recovers,” Moody’s said.
LMC said the global industry will be hit worse than during the Great Recession (of 2008/9) when sales fell 8.7% over two years to 64 million. But this time the industry is well prepared.
“The industry is far better prepared to weather this, and is in a healthier position, after experiencing the 2008-2009 Great Recession. In addition, policy makers have taken a matter of weeks in this crisis to do what took a couple of years during the financial crisis – combining huge monetary and fiscal support packages. The responses may not be perfect, but such coordinated efforts should help facilitate a faster recovery,” LMC said.
Meanwhile on Thursday, Moody’s launched a comprehensive round of warnings about financial problems at big carmakers. Mercedes parent Daimler, Jaguar Land Rover, Groupe PSA, and Renault were among those placed on a review for possible downgrade. Japanese companies Toyota, Honda and Nissan were also placed on review.
Forecasts for European sales of sedans and SUVs in 2020 have fallen from a modest 5% drop only a month ago to up to minus 25% now.
Citi Research also expects some form of European government intervention in the automotive sector, including scrappage incentive schemes.
Investment researcher Jefferies expects some European corporate casualties, but doesn’t say who.
“Industry rationalization is overdue and not all (manufacturers) will emerge intact. Some capital structures need re-building, but it is not clear that existing shareholders or equity markets have the means/appetite to do so, supporting potential M&A (mergers and acquisitions,” Jefferies said.
