Car sales in Europe could return to a “more or less” normal level in July as measures to slow the spread of COVID-19 are relaxed, says Kia Europe COO Emilio Herrera. Noting that April volumes were "catastrophic," with dealerships and factories closed, he is calling for government-backed programs such as scrapping incentives to boost demand.
Herrera, 58, talked about how the industry can recover and Kia’s coming new models in an interview with Automotive News Europe Associate Publisher and Editor Luca Ciferri and correspondent Andrea Malan. Herrera, who joined Kia in 2011 and has been in his current post since April 2018, was named an Automotive News Europe Eurostar in 2019.
The April sales data were very bad. How fast will the European market rebound, and how can governments help?
I think a scrappage plan is probably the best we can do. It has to be broad, not just addressing sales of low CO2-emitting cars. Battery-electric cars and plug-in hybrids are more expensive, so incentives for these cars would mostly benefit company fleets and higher-income people. But if we want to stimulate demand we have to help people who earn less and are maybe the first to lose their jobs, and we need to help them to buy a cheaper car.
How would the market behave with no incentives?
I think sales in May wouldn’t be more than 50 percent of an average month. We see that in the markets where the dealers remained open, the showroom traffic was 50 percent of what it should normally be. June will be probably better as countries release the lockdown measures and there's more freedom to move, but still not a normal month. My expectation is to be at 75 percent of what we should be. Without scrappage plans, we’ll be more or less in a normal situation in July, which is not the best selling season in every country, though, because it starts to be summer season and vacation.
Did you notice any sales channels dropping more than others?
In countries like France, Italy, Portugal and Spain, the tourism industry has collapsed. As nobody will travel to those countries this year, rental car companies have canceled most of their purchase contracts; 80 percent of those contracts, in our case.
How much has Kia’s inventory grown because of the pandemic?
We probably have at this point in time [the end of April] five months of inventory, while we usually have between 2.7 and three months of sales. That's one of the reasons why even in the factories that are restarting, we are not at full capacity, not only because there is no demand, but also to be really honest, there was no place to stock the vehicles. The compounds where we put those vehicles are full.
Do you favor specific incentives to get rid of cars in stock?
I understand such proposals, but I'm not sure it's very viable because we need to let the customer decide. Take for example cars that were meant for rentals: Sometimes their very basic specs make them a hard sell through the dealer network.