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We live in unprecedented times. The spring of 2020 has been
likened to 1918, when 500 million people, or about a third of the
world's population at the time were infected with the Spanish flu,
or the Great Depression when worldwide GDP fell by an estimated
15%. But the difficult-to-absorb fact is that, for the first time
in recorded history, we are experiencing the turbulence and
uncertainty of multiple catastrophes simultaneously.
The automotive industry is not immune and is currently facing one
of the most significant disruptions in its history.
Nowhere is that more evident than in Europe. The IHS Markit
forecast for West Europe calls for a 25% decline in 2020 and modest
growth in 2021, based in part on a weak base in 2020. From a
production perspective, major West Europe countries will inch
closer to pre-crisis output rates by July with Germany leading the
way; production levels will approach 85% of pre-crisis levels. Most
European countries have loosened containment restrictions, yet some
consumers remain very cautious.
China leads global markets in the still relatively early stages
of recovery from the significant impact of the COVID-19 pandemic.
As demand recovers, automakers are working diligently to maintain
inventory alignment, further evidenced by recent robust production
results. The Greater China market has seen a resumption of economic
growth, and output has achieved solid momentum. New vehicle
deliveries are forecast to decline 12% this year but then climb by
9% in 2021, again due in part to a weak base. Light commercial
vehicle demand and production in China recently have been propelled
forward in large part by significant investment in infrastructure
construction funded by the central government.
Looking to the United States, IHS Markit forecasts that US new
light vehicle sales in 2020 and 2021 will reach 13.3 million and
14.6 million units, respectively. Despite a very challenging
economic environment, US retail demand for new vehicles has proven
a bit more resilient than was originally expected.
IHS Markit US registration data indicate 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 area (DMA)
and a rural state
