China Leads Auto Industry Revival
China’s auto industry is bouncing back sharply from the COVID-19 pandemic. It will be slower going for other regions, says LMC Automotive.
The industry’s output this year will total 71 million units, down 20% from the 90 million vehicles built in 2019, according to the forecasting firm. LMC doesn’t expect global output will surpass year-earlier levels until December.
Image: Society of Motor Manufacturers and Traders
The slump has hammered capacity utilization. The average for auto assembly plants so far this year is about 48% and will improve to only 54% in 2021. LMC says capacity utilization was at 62% in 2019 and 66% in 2018.
First In, First Out
The timing and pace of recovery will vary significantly by region. Recovery will be shaped by a blend of local economic and supply issues, sales demand and the effectiveness of each country’s response to the health crisis.
In China, where the coronavirus pandemic—and the industry’s downturn—began, vehicle output plunged 80% in February. Yet some factories were back online only 15 days later. LMC says the shortfall in year-on-year output shrank to 43% in March and narrowed to an estimated 6% last month.
LMC currently forecasts that China’s full-year light-vehicle production will fall by 16%, or 3.1 million vehicles. But the firm says the gap could drop half those numbers if the current pace of rebound continues.
Slow Going in North America
Unlike China, auto production in North America was still slightly outpacing year-earlier levels in February. Then Detroit’s Big Three carmakers agreed to shutter their plants in mid-March, cutting the region’s output for the month by one-third.
Production plunged 99% in April after virtually all carmakers in the region shuttered their plants, then extended the shutdowns.
LMC estimates that output in North America this month will be down by two-thirds as manufacturers adopt different relaunch strategies. The gap will narrow to about 18% in June, but it won’t top year-ago volume until December.
Why not sooner? LMC points to likely supply problems with Mexico, where lockdowns began only recently. If the firm’s current projections hold, auto output in North America this year will fall by 21%, or 3.8 million vehicles.
Heavy Hit in Europe
LMC says the recovery in Europe will be slower than in China or North America because the pandemic swept across the region rather than hitting it all at once. The slump also will cut deeper than in any other region. LMC estimates full-year output will be down by 28%, or 5.5 million cars and light trucks.
European auto production shrank about 41% year-on-year in March and fell 90% in April. LMC estimates output will still be off by 68% this month and about 30% in June.
As in North America, European production isn’t likely to turn positive until December.
Slow Motion in Asia
Recovery will be a long time coming across Asia outside China, where production has lagged all year. LMC says the shortfall reached 20% in March, deepened to 58% in April and will be at about 48% this month.
LMC predicts Asia’s non-China output will be down about 28% in June and 17% in August. The gap still will be at about 8% in November. The firm says the drawn-out recovery is due in part to India, which didn’t shut down its auto industry until late last month.
“Winners” among OEMs
The pandemic dented production among all major carmakers. But some have fared better than others.
LMC says the least impacted through the first four months of 2020 were General Motors (production down 15%), SAIC (-15%) and Hyundai-Kia (-16%).
Those most hammered by the pandemic were Suzuki (-33%), Fiat Chrysler Automobiles (-29%), the Renault-Nissan-Mitsubishi alliance (-25%) and PSA (-24%).
LMC says carmakers with a strong presence in China have weathered the production crisis better than companies with a narrower regional focus.
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