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March 17, 2020 03:12 AM

Taking inventory

Luca Ciferri
Luca Ciferri
Associate Publisher and Editor of Automotive News Europe
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    Editor's note: Luca Ciferri, editor and associate publisher of Automotive News Europe, is living under quarantine at his Italian home in Villastellone, just south of Turin. He will be filing daily updates in this blog post.
     
    A growing number of manufacturing plants across Europe will stop producing vehicles this week, following drastic Europewide actions announced on Monday by Fiat Chrysler Automobiles, PSA Group and Renault.

    Does this mean dealers and customers could soon face a product shortage?

    Looking at the question from Italy, which has been the European country hardest hit by the coronavirus outbreak, the answer is no.

    With 60 days of inventory here on average, it will take 30 to 45 days before we see sweeping supply issues that affect more than just a few popular models.

    Nevertheless, the real challenge will be re-calculating preferred inventory sizes in Italy.

    According to the latest figures, 27,980 people in Italy have been diagnosed with the virus. Of that total, 2,158 have died while 2,749 have made a full recovery, the government said on Monday.

    People here can only leave home to go to work, buy food or get medicine. There is no demand to fulfill, which is why the majority of dealers closed their sale departments on March 12.

    The open question is how long can the current inventory level last under the looming New Normal? Could it be 90 days, 120, maybe even 150? It's hard to predict.

    Registrations declined by a third to fewer than 27,000 units in the first two weeks of March, compared with the same period in 2019. The pace of decline accelerated from about 15 percent in the first week of March to 50 percent in the second week, industry sources told Automotive News Europe.

    On Friday, March 13, fewer than 500 new cars were registered, a decline of 90 percent compared with the second Friday of February.

    If dealers in Italy do not resume sales, which they can't until March 26 at the earliest under the current restrictions, March registrations could plummet 85 percent. At that rate 170,000 sales would be lost. That figure nearly equals Italy's total vehicle sales for April 2019 (174,000). Said another way, that would boost inventories to 90 days at last year's run rate -- and even more at this year's rate.

    Spain and France will probably face the same problem now that the governments in each country have implemented restriction that have made purchasing a car nearly impossible.

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