The European automotive industry will be hardest hit by the coronavirus crisis, but sales loss projections for 2020 are lower than last month’s peaks of more than 30%.
“Europe will be the worst region of action in 2020 with a 20.1% decline,” Fitch Solutions Country Risk – Industry Research in one report.
This compares with a decrease forecast of 18.4% for China and 18.5% for the United States and Canada.
And while automakers’ finances will be affected, those in electric car portfolios will suffer less, or at least be relieved.
At the end of last month, LMC Automotive predicted a 25% drop in European sales to 15.5 million cars and SUVs through 2020, while Alix Partners experts forecast a 32% decline. More than a month ago, Moody’s Investors Service fell 30%.
And now Moody’s has a position on the industry’s prospects. The rating firm recently downgraded nine of the world’s 22 automakers covering $130 billion debt that reflects the consequences of the global pandemic, but commented.
“Automakers whose ratings have recently been downgraded have already faced demanding operational or competitive situations and the recession is likely to remove those existing weaknesses,” said Bruce Clark, senior vice president of Moody’s.
“However, the automotive industry as a whole is much better prepared for this recession than the previous one (after the 2008-2009 recession), with abundant liquidity, more manageable cargo structures, more effective automotive chains and a focus on achieving a return on capital.”
LMC adheres to its projection of minus 25% for Europe, despite the incentive programmes announced by governments. The most productive electric car brands will receive a boost.
“Europe is expected to see a 25% drop in sales compared to 2019, given the announced incentive and scrapping programmes proposed by governments. Manufacturers that generate the widest diversity of BEVs (battery electric vehicles) such as VW and PSA Group are well placed to take credit for any increase in demand for that result,” LMC said.
GlobalData is close to the LMC projection, but notes that the slowdown is much higher than the aftermath of the 2008-2009 recession, after reminding us that European sales in May fell by 57.2% in the last year.
“However, the locks relaxed in May and we expect a slow improvement in the demand for new cars in the region for the rest of the year, especially as the incentives to buy and discard come into play in key markets such as France, Italy and Spain,” said GlobalData analyst. David Leggett.
“Nevertheless, GlobalData forecasts that the European light vehicle market will turn out down 23.2% this year at 15.8 million units. That’s a much bigger drop than occurred during the international financial crisis of a decade ago,” Leggett said.
Investment bank UBS also appreciates the look of VW and PSA shares.
“VW and PSA stand out as stocks with the greatest revaluation and space perspective for positive earnings and surprises from FCF (free money flow). In addition, vw will likely be rewarded through the market for its competitive EV strategy, with the number being a beneficiary of the EU green recovery,” UBS said in a report.
This might seem hard to believe, however, just over three months ago, forecasters expected car sales in Europe to fall by only about 5% in 2020, but as the effect on the virus accelerated the closures, forecasters cut the forecast still dropped a little later.
As a former European Reuters correspondent, I spent a few years writing about the industry. I’m going to penetrate the hype and arrogance and find
As a former European auto correspondent for Reuters, I spent a few years writing about the industry. I’m going to get to the exaggeration and arrogance of corporations and find out what those giant corporations are doing. I also like to drive their lovely machines and their modest maxims. I’ll tell you if the generation works too.