Overview

While China is recovering from the worst impact of the coronavirus, the focus has shifted to Europe and the USA. Factories in Hubei province, responsible for the supply of auto parts to many manufacturers worldwide, are slowly resuming operations after the extended shutdown. But the situation in Europe and the US is shifting rapidly from the problem of securing parts supplies to those of reducing demand and, potentially, labor shortages as workers stay home in self-isolation or through sickness.

Counterpoint estimates global automotive demand will fall 7% (YoY) in 2020, with most of the drop in sales during H1 2020.

China

The Chinese government is encouraging manufacturing companies to resume operations (albeit under strict conditions), and Counterpoint expects the Chinese economy to start improving during Q2 2020. However, business-as-usual will likely only be reached in Q4 2020. Retail automotive sales will recover rather slowly as customers gain the confidence to go out to retail stores and test drive new vehicles. Counterpoint estimates 1H 2020 will see the steepest decline in sales, with overall sales in 2020 falling by 12% compared to 2019.

Europe

EU new car registrations declined by 7.5% and 7.4% (YoY) during January and February. These declines were primarily due to stringent emission norms and a slowing economy rather than coronavirus. We expect the increasing impact of COVID-19 on the automotive industry to drive a further decline in sales in the region in the coming months.

Given the exponential increase in coronavirus cases in key countries (see below), Counterpoint estimates a steeper decline in sales during H1 2020. Multiple car manufacturing facilities are temporarily closing or heavily scaling back production across Europe, including VW, Daimler, Ford, Fiat Chrysler (FCA), PSA Group and Renault. While FCA and PSA Group indicated operations would stop until the end of March, Renault did not indicate when its plants will reopen. BMW, VW, Toyota, Honda, and Nissan have also halted production in the UK with Jaguar Land Rover expected to follow suit.

Overall sales in the region are estimated to decline by around 7%, mostly due to steeper declines in key countries like the UK (-5%), Germany (-6%), Italy (-20%) and Spain (-10%) – which together account for a majority of vehicles sold in Europe.

Exhibit 1: Coronavirus Reported Cases in March 2020

USA

The big three automakers – GM, Ford, and FCA US, under pressure from unions to protect employees, and to follow government advisories, decided to idle their plants in North America. Toyota, Honda, Tesla, and Nissan also announced a temporary suspension of production in North America.

Car dealerships too are expected to suffer in the coming months with governments calling for lockdowns to commercial centers, shutting off walk-in customers and test drives. Based on the current situation, Counterpoint estimates a sales decline during 2020 of 6%, increasing to 8% in case of a prolonged outbreak of the virus.

Exhibit 2: Forecast vehicle sales in 2020