Europe, world sales forecasts continue to tumble

Analysts continue to revise their sales forecasts downward in the face of the coronavirus pandemic, even as the global automotive industry starts to stir to life again.

IHS Markit said this week that it is predicting global light vehicle sales will fall 22 percent for the year to 70.3 million units. Underlying that gloomy scenario is a “hard and fast” fall into a real recession, with GDP down 3 percent, the analyst company said.

Any recovery will likely be “disorderly and jagged,” IHS said this week, with production starting in April in some areas such as Eastern Europe and showrooms reopening elsewhere, including Germany -- but other markets remain under total shutdown. 

"Market fortunes are expected to be mixed, as delayed and destroyed demand interacts with massive global supply disruption," said Colin Couchman, executive director, global autos demand forecasting at IHS Markit. 

IHS said light vehicle sales in Western and Central Europe would fall 25 percent this year to 13.6 million units. It pointed to countries where lockdowns are already being eased as “markets to watch for grassroots of recovery,” including Austria, the Czech Republic, Denmark and Germany. 

LMC Automotive said European production would probably be down 98 percent in April, with any meaningful output starting only in May, but output next month is still expected to be down 75  percent year over year. 

Morgan Stanley is offering three scenarios for Western European sales. In the worst case, if lockdowns continue in the second half of the year and auto loans are harder to get, sales fall to 10 million, representing a decline of 30 percent compared with 2019. In Morgan Stanley’s base case, sales are 11 million, a 23 percent decrease. In the best case, stimulus programs in Germany and elsewhere put in place in July lead to 12 million annual sales, a 16 percent decline. An earlier base case predicted sales would be 12.5 million units.

"While virus-related production recovery may be V-shaped [meaning sharp decline and recovery], we remain concerned that demand and auto credit will not be,” Morgan Stanley lead analyst Harald Hendrikse said.

As a comparison, the last time Western European auto sales were below 12 million was in 1994, when they were 11.94 million, according to industry group ACEA. Last year, 14.3 million vehicles were sold in the region. 

Factories in China, where the coronavirus outbreak started, have largely reopened after being closed from mid-January until mid-March in most cases.

The country’s demand is expected to slip by about 16 percent or more, to about 21 million units, IHS said, and a second wave of the contagion could see it fall even more. A dozen Chinese cities have put incentives in place to encourage buyers, IHS said, but the central government has not yet offered a wider plan.

LMC Automotive pointed to a March sales decline of 46 percent, compared with 80 percent in February, as an example of what a recovery might look like initially. For the year LMC is forecasting a 12 percent decline in light-vehicle sales in China.

ISI Evercore is predicting an annual sales decline of 10 percent to 12 percent, with sales possibly turning positive in July.

And LMC said a 10 percent increase in March sales in South Korea showed “how a well-managed response to the virus outbreak can lead to a significantly better economic outcome.”

In the United States, where factories remain closed, the light vehicle market is expected to fall by 27 percent this year to 12.5 million units, IHS says. 

Another analyst firm, J.D. Power, said its outlook for 2020 U.S. retail sales is now 11.3 million to 12.5 million, compared with a pre-virus baseline of 13.4 million. It sees total 2020 industry sales, including fleet, of 12.6 million to 14.5 million, down from a pre-virus forecast of 16.8 million. 

More states have moved to allow online sales, which combined with incentives and 0 percent financing, could cushion the blow a bit, said Jeff Schuster, senior vice president of forecasting with LMC Automotive, a partner of J.D. Power.

The  U.S. Department of Homeland Security guidelines has designated vehicle sales as an essential service. All states now allow cars and light trucks to be delivered through showrooms or online, according to J.D. Power.