The coronavirus pandemic has resulted in work stoppages, delays in production schedules, supply chain breaks, and market uncertainty for businesses all around the world.
One major sector that has not been spared the effects of the contagious condition and its economic fallout is the auto industry.
The sharp decline in demand for vehicles has cast an uncertain pall over the vehicle sector, and estimates vary for how soon auto firms will put this dramatic commercial turbulence behind them and what percentage will survive.
According to Global Trade Magazine, these are the five main reasons for the massive disruption in the globally integrated automotive industry:
1- Lockdowns and curfews
The lockdowns and curfews imposed by governments to limit the spread of the virus have affected people’s general way of life, and the fact that more people are staying at home has led to a natural decline in demand for cars.
2- Economic slowdown
The pandemic has caused an economic slowdown, which has adversely impacted the car industry as people tend to become more budget-conscious.
The long-term effects of the coronavirus crisis still remain unclear, but Global Trade Magazine says car manufactures expect only a delay in the purchases rather than people refraining from making the purchase.
The reason for this expectation is that people buy cars mainly due to their need for a car and not on a whim. So they cannot postpone their purchase indefinitely.
3- Closure of factories
China is a major hub of car manufacturing, and as the coronavirus originated from the country, many plants are closed down. Other countries have also shuttered factories to prevent the spread of the disease. All this is slowing down the manufacturing of cars around the world.
4- Need for medical equipment
The sudden onslaught of the coronavirus pandemic has caused a sudden surge in demand for emergency medical equipment and protective gear.
As a result, some car manufacturers have repurposed their plants and made modifications to the production line in order to make face masks and ventilators.
5. Slowdown of international trade
A shortage of parts and raw materials due to international trade restrictions has led to the temporary stopping or slowdown of the manufacturing process of cars around the world.
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Light Vehicle Sales, Production
IHS Markit, a London–based global information provider, wrote in a recent report that global light vehicle sales are forecast to be 69.6 million units this year in the wake of the pandemic—22% lower than in 2019.
The IHS Markit forecast for Greater China sales in 2020 sees volume at 21.4 million units, a 15% decrease from 2019 levels. It says volume could recover to 23.2 million units in 2021.
Its analysis shows that Europe will see sales fall 24.6% to 15.5 million units, while sales in North America are expected to drop 26.7% year-on-year in 2020. In particular, the U.S. market sales forecast is 12.5 million units.
Global light vehicle sales are forecast to be 69.6 million units this year in the wake of COVID-19—22% lower than in 2019.IHS Markit
The research firm projects a similar decline for global light vehicle production.
“Affected first by stay-at-home orders in an effort to contain the virus and then by expected weak demand, global light vehicle production is now expected to drop to 69.3 million units in 2020—a 19.6-million-unit decline from 2019.”
It says output in Greater China is expected to drop to 20.9 million units in 2020, compared with 24.7 million in 2019.
Production in Europe is forecast to drop to 15.9 million units, in comparison to 21.1 million in 2019.
The latest IHS Markit forecast sees North American production dropping to 12.2 million units, from 16.3 million in 2019.
Full-year 2020 Japan production is projected to decline by 20.4% year-on-year to 7.3 million units. This is while full-year 2020 Korea production is forecast at 3.2 million units, dropping by 16.7% relative to 2019.
Commercial Vehicle Production
According to another recent analysis by IHS Markit, global commercial vehicle production volumes this year are forecast to be down 22% to 2.6 million units compared to 2019 in the wake of COVID-19.
It believes that recovery in 2021 is expected to be substantial but short of returning to the previous trend.
Here is the key regional insight on some major markets provided by IHS Markit:
Earlier this year, shutdowns across China resulted in more than 80,000 units of lost production among truck manufacturers. However, the situation is improving as most commercial vehicle factories in mainland China have returned to production now.
For the North American market, IHS Markit predicts a production decline of more than 30% in Class 4-8, or about 198,000 units, from earlier projections.
It says no more than 387,000 units (excluding bus chassis) will be produced in 2020 in the region.
“Output of Class 8 trucks is expected to drop more sharply than of Class 4-7, and within Class 8, tractor trucks are anticipated to fall the most, as much as 50% from 2019 production levels.”
According to the official data cited by IHS Markit, preliminary registrations suggest a year-over-year decline in new Class 4-8 truck registrations of approximately 30%.
Europe has become the epicenter of impact on the vehicle industry due to stay-at-home orders, stringent plant closures, supply chain challenges, and workplace controls across the region.
For the year, IHS Markit expects a decline in the European production of 14% from the prior year.
It anticipates some of the sharpest slides in demand in Italy and the United Kingdom in Western Europe and in countries including Poland in Central Europe, where the trucking industry prominently supports European goods movement.
Most major truck producers in Japan and South Korea have been forced to suspend operations due to reported parts shortages, resulting in at least 8,000 units of lost production.