LMC Sees Auto Sales Recovery by 2022
Car sales in the U.S. and around the world are on the mend. But they won’t return to 2019 levels until 2022, says LMC Automotive.
LMC spelled out its latest forecast earlier today in an online briefing about global light vehicle production and sales.
The market analysis firm says the big jump in light-vehicle deliveries seen almost everywhere in June was a temporary spurt caused by pent-up demand and extended by government incentives. Those distorting forces are waning, but the strength of the “true” market remains murky.
Sales over the next few years will certainly rebound. But to what level? Before COVID-19, LMC and other analysts were predicting an slow decline in sales—starting about now—as an expected aftermath to nearly a decade of expansion.
The pandemic obviously upended the expected gentle decline predicted late last year. Worldwide demand for passenger vehicles this year will plunge 16% to 76.3 million vehicles, says Jeff Schuster, LMC’s president of global forecasting.
Schuster doesn’t expect total sales will match last year’s level until the end of 2022. By then, the global industry will have lost 30 million vehicle sales.
Closer to home, LMC predicts the U.S. market will tumble 16% this year to 14.3 million light vehicles. But deliveries will then advance 8% to 15.4 million in 2021 and 5% to 16.2 million in 2022. The pace after that will slow as the overall market becomes saturated.
N.A. Production Outlook
It’s a similar picture for production in North America. Last year, the region built 16.2 million car and light trucks. This year, after a 45-day production halt caused by coronavirus lockdowns, output will tumble 19% to 13.1 million units, says Bill Rinna, LMC’s director of vehicle forecasts for the area.
Rina forecasts that output in North America will climb 17% to 15.3 million light vehicles in 2021, surpass last year’s total by 2022 and rise to 18 million by 2027. Much of growth next year will involve rescheduled production launches. Rinna notes that 80% of this year’s debuts were delayed or canceled because of the pandemic.
Lurking beneath LMC’s forecast are uncertainties about the underlying strength of regional economies, especially in terms of their labor markets and disposable income levels, notes Greg Daco, chief U.S. economist for LMC partner Oxford Economics.
The main challenge: National economies have far deeper holes to climb out of than they did in the depths of the Great Recession a decade ago.
Consider the U.S. job market. When COVID-19 prompted lockdowns last spring, 22 million jobs disappeared in two months. That wiped out 20 years of accumulated jobs growth.
Half of those positions have already been restored, an impressive show of resiliency. But Daco also notes that employment remains 7% below the January level—and equals the bottom of the previous recession.
More worrying: Further job gains are slowing, personal savings rates have dried up, and consumer spending is cooling. A major second wave of COVID-19 infections, especially if they lead to widespread stay-home directives, would capsize current forecasts.
But LMC, for one, doesn’t expect more coronavirus problems. But Daco does anticipate a “rather bumpy” recovery in the months ahead until jobs, economic growth and health issues get sorted out.
Major markets overseas face similar issues.
China, one of the industry’s relative bright spots because of its quick recovery early this year, remains a “very difficult market,” according to LMC. The firms predicts sales in the world’s largest market will shrink 9% this year but rebound 10% in 2021.
But the recovery has been uneven. Luxury brands, mostly from Europe, are posting robust sales. More mainstream brand are down by a combined 16%, and the small-car market is suffering. Several carmakers, who had hoped to expand export sales in 2020, have retrenched until overseas markets improvement.
Car sales in Europe plunged to an annualized selling rate of just 5 million units earlier this year but jumped above 20 million in July and September. Now they are sagging as government incentives, which vary widely nation by nation, are ending.
LMC expects Europe’s car market will plunge 20% to 16.5 million this year, before rising to 19.0 million in 2021. Local carmakers have been “very cautious” about production this year. The firm says European output isn’t likely to match 2019’s level until 2023.
Korea, where a fast government response to the pandemic paid off with year-on-year growth in car sales, has been the least impacted of all major auto markets. A fortuitous tax cut in March for new vehicles has helped support the domestic market. But LMC says exports face a slow and risky revival.
Japan, where car production has slumped 17% this year, is likely to rebound 11% to 8.5 million units in 2021. But the pace of recovery is threatened by weak export markets and a likely new COVID-19 outbreak.
Southeast Asia saw its domestic sales plummet 31% to 2.3 million units, and the region is in “considerably worse” shape that it was during the last financial crisis with “severe” loss in volume, LMC says. Recovery “will be slow and painful.” New lockdowns and political upheaval threaten to stall a full recovery until 2024.
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