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Global commercial vehicle production expected to drop 22 percent
17 April 2020
Global commercial vehicle production volumes in 2020
compared to 2019 are forecast to be down 22 percent to 2.6 million
units, according to IHS Markit
Global commercial vehicle production (GVW 4-8) volumes in 2020
compared to 2019 are forecast to be down 22 percent (more than
650,000 units) to 2.6 million units, in the wake of the COVID-19
pandemic, according to the most recent analysis from IHS Markit
(NYSE: INFO). Individual regional forecasts are set to a downtrend,
and supply chain impacts are being felt, as the consequences of the
virus have shuttered manufacturing and supplier facilities around
the world. These forecasts are informed by the latest IHS Markit
global economic forecast updates, which reflect a 3.0 percent
decline in global real GDP in 2020.
China Slowly Gaining Momentum after
Shutdown
Most commercial vehicle factories in mainland China have
returned to production now. Earlier this year, shutdowns across
China resulted in more than 80,000 units of lost production among
truck manufacturers in the January-February period; March output
appears to have recovered a portion of this volume, despite Hubei
province workers returning in the second week of the month, later
than plants in other provinces. In fact, the relative strength of
the March data compared to February suggests many plants may be
online near full capacity again. Looking across the full year, IHS
Markit is expecting a 21 percent decline over 2019 production
volumes due to a combination of factors including COVID-19, but
also the natural weakening in truck demand following unusually
strong sales in 2018-19.
The policy response to assist the commercial-vehicle industry
has been broad, with a variety of direct and indirect supports
announced, locally and nationally. By way of example, while the
logistics industry has been negatively impacted, one of the
measures so far announced includes the exemptions on payments of
highway tolls through the end of June, and subsidies on New Energy
Vehicles (NEV's) have been extended for another two years, from
2020 to 2022. New financing has also been announced to eliminate
high emissions vehicles in key regions which should give some
support to boost to truck sales, all else equal. More indirect
steps for the industry also include bond-financed infrastructure
investments; measures to stimulate domestic consumption; and
policies to support small- and medium-sized companies, in
particular, and companies in Hubei province to stabilize the
employment rate.
"The local industry is already recovering, with commercial
vehicle plants re-opened," said Andrej Divis, director of
commercial vehicle data & forecasts at IHS Markit. "March
appears to have been solid, on preliminary data, and April may even
reach prior-year volumes thanks to strong government stimulus, but
we do not see all of the lost volume being made up. We are trimming
our full-year outlook for the region by about 4% compared to
earlier expectations."
Regional Impacts Based on Ordered Shutdowns and
Demand
Regional impacts will vary as the virus runs its course and
significant business has been halted. As of now, IHS Markit
predicts nearly all regions will see percentage declines in the
double digits this year, with sales and production of tractor
trucks a.k.a. "artics", generally, leading the way down. The
unfolding crisis will cast a shadow over truck demand in the medium
term, too, subject to the details of government policy responses
and the eventual duration of the crisis. Existing information leads
IHS Markit to believe that recovery in 2021 is expected to be
substantial, but short of returning to the previous trend. Key
regional insight on a few major markets follows:
For the North American market, IHS Markit forecasts a production
decline of more than 30 percent in Class 4-8, or about 198,000
units from previous forecasts, as the economic slump combines with
rapidly ebbing replacement pressure to undermine new orders. For
the full year in the region, no more than 387,000 units (excluding
bus chassis) will be produced in 2020, as truck makers have planned
downtime through mid-April (possibly to be extended), which will
account for approximately 13,000 units of lost production in North
America this month alone. 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. This reflects anticipated shifts within the U.S.
truck-buying industries primarily, but Canada and Mexico are
likewise seen with significant declines in 2020 demand.
Within the US, an analysis of weekly new vehicle registration
statistics, available sooner than full-month production figures,
confirms the expected direction of the market and shows a strong
fall in the last two weeks of March, with a sizable decline as the
COVID-19 situation evolved around the US. Preliminary registrations
statistics for the month of March suggest a year-over-year decline
in new Class 4-8 truck registrations of approximately 30%.
Europe has become the epicenter of impact with nearly 50,000
units of lost production in March and April, as of this writing,
due to stringent plant closures, workplace controls across the
region, supply chain challenges, and stay-at-home orders. For the
year, IHS Markit forecasts a decline in European production of 14
percent from the prior year. This downturn in production, of
course, reflects weaker demand throughout the region as well as in
export markets. IHS Markit 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. Meanwhile,
in Russia, the combined negative impact of historically low crude
oil prices and pandemic-induced lockdowns will undermine the
country's already weak growth, which will disrupt truck demand.
For major truck producers in Japan and South Korea, most have
been forced to suspend operations due to reported parts shortages,
resulting in 8,000 units of lost production. However, restrictions
are expected to ease through May.
"Overall, compared to the downturn experienced in 2009, on a
calendar-year basis, we're seeing the same type of decline with
respect to the prior year- a global production decline of about 20
percent," said Divis. "However, it's worth pointing out that in
today's environment and given what we expect about the duration of
the crisis, we don't feel the market will fall as far as it did
then in units. A number of conditions are different, including the
growth of the world economy since then and the fact that the volume
of trucks is larger as a result, leading to higher replacement
levels. Also, we expect the intense phase of the health crisis to
pass by year's end, opening the window for trucking to resume its
business. This means that even though monthly production volumes in
the coming quarters may dip below levels we saw during the depths
of the last recession in 2009 in some regions, overall, annual
figures are still expected to be higher than 2009 totals," he
concluded.