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IHS Markit has cut its sales forecast for the Italian
light-vehicle market on the back of the coronavirus disease 2019
(COVID-19) virus outbreak that has now hit the country. For 2020,
we currently expect sales to retreat by 14.4% year on year (y/y) to
1.8 million.
This decision has been taken on the back of the lockdown and
quarantine measures that have been implemented in the country.
These were first introduced for 12 towns to the southeast of Milan
(Italy) in late February and initially affected around 50,000
people. This already led to a reduction in footfall to dealers on
reduced confidence and concerns which would have already led to
reduced orders in the coming months, while the impact on tourism
would likely have led rental fleets to reconsider renewal
programmes. However, the lockdown was expanded on 8 March to
include the entire population of the Lombardy region and a further
14 provinces - Modena, Parma, Piacenza, Reggio Emilia, Rimini,
Pesaro and Urbino, Alessandria, Asti, Novara, Verbano Cusio Ossola,
Vercelli, Padua, Treviso, and Venice - and prevented travel in to
or outside these areas without special permission, hitting around
16 million people.
As of today (10 March), the Italian government is now
implementing a country-wide lockdown. Under the measures described
by Prime Minister Giuseppe Conte as "I stay at home", citizens have
been called on to remain at home to prevent the further spread of
the virus. This will also suspend sports events, and schools and
universities are closed until 3 April. Only those with a valid work
or family reason allowed to travel, with controls to check
temperatures of passengers at train stations.
Outlook and implications
The expected impact of the COVID-19 virus outbreak in the market
comes on top of the challenges already facing the Italian light
vehicle market from existing macroeconomic situation, characterised
by nervous households, struggling exports, weaker investment
trends, and a lack of scope for major fiscal stimulus in 2020.
Under this scenario, IHS Markit had already been expecting
light-vehicle registrations to fall by 1.8% y/y during 2020.
However, following the widening of measures, IHS Markit's March
macroeconomic forecast update will now anticipate a longer and
deeper recession.
The decision to implement a national lockdown which is expected
to have a bigger and longer-lasting impact on the economy has also
caused us to revise our forecasts for the coming years. Although we
expect the light-vehicle market to grow by around 5.5% y/y during
2021, volumes will be 1.9 million units, a level previously reached
in 2015-2016 as the market recovered from the European financial
crisis, while it will not break through the 2-million-unit barrier
until 2022.
Despite the challenges of the latest restrictions, automotive
production in the country appears have been unaffected yet. Indeed,
Ferrari, which is based in the province in Modena, yesterday (9
March) announced that it has confirmed its "operational continuity"
and Maserati production at Modena had already stopped to allow work
to be undertaken to bring to market a new model, and only essential
staff are being called in. Pirelli was quoted by Dow Jones
Institutional News yesterday as stating that production personnel
are working at plants in Settimo Torinese and Bollate, the latter
in the quarantine zone implemented at the weekend. Although the
latest measures will now take in major facilities for Fiat Chrysler
Automobile (FCA) in the country, they do not seem to prevent
production from continuing. For now, perhaps the biggest challenge
to domestic light-vehicle production is weaker demand both
domestically and in the rest of Europe.
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