Car market forecasts likely to be revised as public health crisis deepens

Following news that car sales in China plunged 80% in February due to the impact of measures to tackle the coronavirus (Covid-19), David Leggett, Automotive Editor at GlobalData, a leading data and analytics company, offers his view:

“There are signs that attention in the auto industry is shifting away from tackling immediate supply chain disruption towards the prospect of much lower demand through 2020.

“China’s 80% market decline in February is a stark warning of the potential for lost sales in the global automotive market in the months ahead. Forecasts for car markets are likely to be revised down as the public health crisis deepens – especially in Europe and North America.

“Vehicle manufacturers and suppliers alike will be anxious over the duration of the expected coronavirus impacted market downturn and the speed of recovery later in the year. Even without the added impact of the Covid-19 pandemic, the global vehicle market was heading for a decline of around 2% this year with the US, China and European markets flat or slightly declining.

“The demand outlook has now deteriorated further.

“If the global vehicle market decline in 2020 is nearer 10%, that will inevitably result in much lower earnings for automotive companies, many of whom are experiencing rising cost pressures formed by the necessity to invest in expensive technologies such as electrification. Indeed, the new stronger headwinds on the global car market come as they face the burden of much tighter regulatory hurdles on CO2, especially in Europe.

“While welcome signs of a nascent recovery to activity have been evident in China in recent weeks, the rest of the world is still very much heading into an economic downturn of uncertain depth and duration. Automotive companies will be especially nervous.”

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