Virus Crisis Hits Car Sales in U.S., Europe
When the coronavirus broke out in China, car sales fell 80% to a 15-year low.
What will happen as cases of COVID-19, the disease caused by the virus, spreads in the U.S. and Europe? Analysts predict slumps in both markets, but nothing like what happened in China.
Why the difference? Because, as mysterious as the virus is, health officials and the general public are far more knowledgeable about the situation than they were in January. Sensible preventative action will go a long way toward mitigating the crisis.
Still, Morgan Stanley analyst Adam Jonas says retail car demand in the U.S. will fall 9% this year, knocking out some 1.5 million potential sales as consumers delay big-ticket purchases.
Jonas had estimated earlier that U.S. sales would slip another 1%—the same as in 2019—because of a general market cooldown.
Anecdotal evidence suggests that sales performance this year will vary regionally across the U.S., with the biggest declines coming in areas where COVID-19 cases are the greatest.
In Europe, where 22,800 cases and nearly 1,000 deaths had been reported as of today, several auto assembly and parts plants have suspended operations temporarily because of a confirmed coronavirus case among their workers.
The list of companies with European factories affected this week includes Fiat Chrysler Automobiles, Jaguar Land Rover, Pirelli, PSA and SEAT.
Three days ago Italy declared a nationwide quarantine but allowed factories and businesses to continue operation. The lockdown will continue through at least April 3.
Next week European trade group ACEA will offer a first look at the impact of COVID-19 on the region when it reports February new-car registrations. LMC Automotive has cut its full-year forecast for the region by 4%, or 600,000 units, to 20.5 million vehicles.
January deliveries in Europe fell 7%, but the slump had nothing to do with the coronavirus. Weak economic conditions, the U.K.’s departure from the European union and tax hikes among some EU members were the main culprits. All those issues carried into February, which will make it difficult to sort out the impact of the virus attack alone.
Optimism in China
Shanghai skyline (Getty Images)
The China Assn. of Automobile Manufacturers says factory wholesales to dealers hit bottom in February and will begin to recover this month. But CAAM doesn’t expect volume to return to “normal” until the third quarter of 2020.
At least some producers are beginning to resume partial production in Wuhan, the epicenter of the outbreak. But local parts shortages and sporadic health screenings along trucking routes are slowing the recovery.
Car sales in China began to shrink in mid-2018 and fell 4% last year. It will be difficult at best to separate that trend from the direct effects of the virus outbreak.
LMC Automotive cautions that global demand will remain unusually volatile until consumers feel the COVID-19 pandemic is under control. That isn’t likely to happen for several months.
Jonathon Poskitt, director of global sales forecasts at LMC, says lingering effects of the crisis could extend globally into 2021. He also cautions that a “moderate” pandemic could cut worldwide sales by another 2 million-3 million cars.
LMC’s pre-outbreak forecast was for a slight dip in global demand for cars and light trucks to 90.1 million units in 2020 from 90.3 million last year. The firm now expects a 4% drop—the equivalent of 3.7 million units— to 86.4 million vehicles. That’s twice the magnitude LMC estimated four weeks ago.
“The situation in Europe is extremely challenging and slightly ahead of the U.S.,” says Jeff Schuster, president of LMC global vehicle forecasting. “Both markets are under immense pressure and uncertainty. Things are likely to get worse before they get better.”
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