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IHS Markit trims 2020 global light vehicle sales and production forecasts
30 April 2020
IHS Markit downwardly revised its forecasts for global light
vehicle sales and production as the impact COVID-19 impact has
depressed demand. According the new analysis, global light vehicle
sales are now forecast to be 69.6 million units this year in the
wake of the pandemic. IHS Markit forecasts a similar decline for
global light vehicle production, falling to 69.3 million units.
Auto sales forecast to drop 22.0 percent, with risk for
further deterioration
Impacts to global auto demand in the wake of COVID-19 have
rapidly progressed to severity levels higher than the 2008-2009
recession, and significant uncertainty around prospects for a
meaningful recovery remain. Global light vehicle sales in 2020 are
now forecast to drop to 69.6 million units, 22.0 percent lower than
in 2019, with risks to the forecast still skewed to the
downside.
"The pandemic remains a clear and present danger to the autos
sector, with months of uncertainty expected to cloud hopes for
global recovery prospects," said Colin Couchman, executive
director, global autos demand forecasting at IHS Markit. "The
expected cycle of decline, stabilization and recovery for autos
varies by market, reflecting variations in containment strategies
and policy responsiveness," he said.
In recent weeks, Mainland China is seeing green
shoots of recovery, while much of the rest of the world remains in
lockdown. The IHS Markit forecast for Greater China sales in 2020
sees volume at 21.4 million units, a drop of 15 percent from 2019
levels. Though government incentives could help underpin a more
orderly recovery profile, these are not yet indicated. Nearly all
dealers are back to work and there are signals of an uptick in
showroom traffic, but consumer confidence remains fragile. We may
see a first-in, first-out phenomenon in China, and auto demand
could bottom out midway through 2020 and begin to recover in the
second half of the year. In 2021, volume could recover to 23.2
million units, based on current forecasts.
In Europe, COVID-19 lockdowns remain firmly in
place for Italy, Spain, France and the UK, though show signs of
easing in Germany. Prior to the pandemic, Europe had already faced
uncertainty on the CO2 fleet target timetable and UK and European
Union trade talks. Europe will see mixed recovery cycles, as a
result of local restrictions and varied economic support and
stimulus. Planning is further plagued by varied containment
restrictions across the region, and recovery strategies are a work
in progress. The forecast is for Europe to see sales fall 24.6
percent to 15.5 million units.
North America is forecast to see sales drop
26.7 percent y/y in 2020. In the U.S. a consumer-led recession
looks inevitable for 2020 and autos face a bleak demand slump.
There is no national consistency on rules relative to sales
activity or duration for stay-at-home orders; there remains risk of
another increase in infections, which could result in another wave
of state or local-level restrictions, changing the dynamic again.
IHS Markit expects that the known monetary and fiscal measures are
not enough to prevent a collapse in auto sales, and in 2020, the
U.S. market sales forecast is 12.5 million units.
Production expected to reflect demand
levels
Affected first by stay-at-home orders in 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, according to the latest IHS
Markit forecast.
Though production remains essentially shuttered in Europe, North
America and South America, China has resumed. For shuttered
regions, automakers are developing production re-start plans,
factoring in production/capacity implications relative to
instituting social distancing, various virus testing options and
providing personal protective equipment (PPE). Global automakers
can take best practices and lessons learned from re-starting in
China to other markets, though are still restricted by local
economic restrictions and consumer demand.
The primary driver of the latest outlook for Greater
China includes delayed and sluggish resumption of
operations in the Hubei province. Output is forecast to drop to
20.9 million units in 2020, compared with 24.7 million in 2019.
Further, for many European OEMs in China, the comprehensive spread
of the COVID-19 pandemic in Europe may create shortage of key
components and bottlenecks in China production. Similar risks for
Japanese OEMs in China exist as well, as facilities for
semiconductors and other components have been shut down in the
ASEAN region in recent weeks. Despite modest improvement in the
pace of production in the summer, demand is expected to remain low
given the broader global macroeconomic conditions.
In Europe, expectations for declines in
production are broad-based, impacting essentially all OEMs in the
region as plants have been shuttered to comply with mandated
lockdown measures. With regard to restarting production, a mixed
picture is emerging with some plants resuming production in late
April and others extended to early May - all under a fairly slow,
methodical ramp-up scenario. The deterioration in the macroeconomic
outlook and the broad COVID-19 containment measures have resulted
in material reductions in the demand outlook. Production is
forecast to drop to 15.9 million units, compared with 21.1 million
in 2019.
In North America, IHS Markit forecasts further
deterioration relating to the COVID-19 crisis and its impacts on
U.S. auto sales. The 2020 forecast reflects a nine-week shutdown
across the region with production for most plants expected to
resume beginning the week of May 18. April production is projected
at roughly 4,300 units, marking the lowest monthly production level
since 1945, following the end of World War II. Production is
expected to return at a gradual pace with reduced shifts and
continue to ramp-up through the second quarter of 2020. Further,
the forecast reflects manufacturers utilizing summer shutdowns to
assess inventory and demand, making additional plant adjustments to
ensure worker safety and resuming maintenance and retooling efforts
where needed. The latest IHS Markit forecast sees North American
production dropping to 12.2 million units, from 16.3 million in
2019.
In Japan, lost volume related to the COVID-19
outbreak will reach over 400,000 units by the end of June as the
Japanese government announced extended lockdowns in various parts
of the country. Full-year 2020 Japan production is now expected to
decline by 20.4 percent y/y to 7.3 million units. In South
Korea, automakers have been operating normally since the
4th week of February. However, production adjustments are expected
in the second and third quarters due to reduced demand, as the
COVID-19 outbreak started to intensify in the middle of March.
Export demand from Europe and the United States, which accounts for
more than 60 percent of total exports from South Korea, has been
materially downgraded. As a result, full-year 2020 Korea production
is forecast at 3.2 million units, declining by 16.7 percent
relative to 2019.