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We live in unprecedented times. The spring of 2020 in the United
States has been likened to 1918, when 675,000 US citizens succumbed
to the Spanish flu, or the fall of 1932, when US unemployment
reached 25%, or 1968, when rebellion permeated the US culture and
universities nationwide went on strike. But the difficult-to-absorb
fact is that, for the first time in recorded history, we are
experiencing the turbulence and uncertainty of all three
catastrophes simultaneously.
The coronavirus disease 2019 (COVID-19) pandemic has not
discriminated in rendering unparalleled economic distress around
the world. With global real GDP, as projected by IHS Markit,
expected to contract by 6% in 2020, this downturn is poised to be
much worse than the Global Financial Crisis of 2008/2009. The
automotive industry is not immune and is currently facing one of
the most significant disruptions in history. IHS Markit's forecast
of a 22.8% contraction in US light vehicle sales in 2020 rivals, or
exceeds, the most severe single-year sales contraction since before
World War II.
Our data suggest that the mix of households returning to market
this past March contrasted sharply with the pre-COVID mix.
Specifically, US households that returned to market this
year, when compared with their counterparts a year ago,
were:
More likely to own a light truck than a car
More likely to own a domestic vehicle than an import-branded
vehicle
More likely to own a pickup than any other body style
More likely to live in a smaller designated market areas (DMAs)
and a rural state
More likely to be older and Western European
More likely to purchase than lease.
US new vehicle sales in the first half of June were up 18%
compared with the same period in May, with luxury vehicle
deliveries jumping 45%, mainstream utility vehicles up 25%, and
mainstream cars up 14%. Pickup deliveries declined 7% as depleted
inventories restrained sales during the timeframe. Light truck
inventories nationally at the end of May were only half of their
levels a month earlier as production was slow to ramp up across the
United States.
Looking at new vehicle registrations at the state level, the
three states with the greatest improvements in
retail deliveries mid-June (over the first half of May) were:
New Jersey (up 69%)
Michigan (up 66%)
New York (up 60%)
These states were among the hardest hit by COVID-19, and
therefore have the greatest opportunity for revival. These factors,
independently and combined, create significant opportunity for
original equipment manufacturers (OEMs) and marketers as they make
plans for recovery. But even with recent gains, uncertainty
abounds.
Introducing the COVID-19 Recovery Series
With the goal of mitigating this uncertainty, IHS Markit is
announcing a thought leadership series focused on COVID-19 and its
aftermath. With over 180 in-country senior automotive analysts
covering every major market around the world, IHS Markit is
well-positioned to offer COVID-19-related insights to the industry.
Our analyses are relied upon by every major automaker, 95% of the
leading automotive suppliers and a diverse group of financial
institutions and other interested stakeholders.
Specifically, IHS Markit will publish three unique insight
pieces providing research and perspectives into how the US new and
used vehicle ecosystems have already evolved from their
pre-COVID-19 days, and, more importantly, what the more settled
post-COVID-19 world, when it does arrive, will look like. These
papers will be valuable resources with which to navigate a path to
a "new normal" in such unique times.
COVID-19 Recovery Series Schedule
August 2020: The OEM Landscape - Focus on
US
This issue will address brands and how they have evolved, changes
in product plans due to the virus (including AV and EV programs),
the use of incentives, the relationships between brands and their
captive finance sources, and manufacturers' strategies for
retaining current owners and conquesting new households.
October 2020: Supplier Strategy Reset
This edition will look at the supplier community in both the short
term, including restarting production lines and addressing
liquidity issues (no production for two months), and the longer
term, re-evaluating future research and development as well as
capital expenditure decisions in an environment more fluid than
that found pre-COVID-19. For example, suppliers will need to alter
their focus of precious resources towards electrification
innovation. IHS Markit forecasts a greater focus on hybrid
technology (all electrification less battery electric offerings),
rising to 18.9% of NA production volume by 2025 - up one point from
pre-COVID-19 forecasts. This reflects an expected focus on hybrid
technologies (away from battery electric vehicle [BEV]) and forces
suppliers to align their plans in a fluid environment.
October 2020: Automotive Retail
This installment addresses the impact of the pandemic on consumer
behavior and how mobility shifts have influenced dealer standards
and capacity, dealer profitability models, OEM changing views on
legislation, and the role of dealers in the future. Research and
insights into these accelerating trends will highlight the
alterations automotive manufacturers and dealers must make in the
short term to survive these trying times, as well as the
longer-term strategies to enact to ensure prosperity going
forward.
