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EUROFER Automotive Industry Forecast 2020-21

Steel News - Published on Wed, 12 Aug 2020

Image Source: EU Automotive Industry COVID19
The EU automotive sector was already suffering its worst slump since the Eurozone crisis of 2009-2012, before the onset of the COVID-19 outbreak that led, in March and April this year, to an almost complete stop in production across EU car plants. Sluggish domestic and export demand, trade-related uncertainties, emissions woes, shifting patterns in ownership and model ranges took their heavy toll on production activity during 2019. Output in the automotive sector has fallen since the third quarter of 2018, resulting in annual drop of -4.6% over the entire year 2019 (the first since 2013), and equating to year-on-year fall of 16% in the first quarter of 2020 (after -6.5% in the fourth quarter of 2019).

In the first quarter of 2020, sales of passenger cars in the EU fell by 25.6%. March, in particular, was the first month when the effects of the COVID-19 pandemic on the market became pronounced: there was a dramatic drop (-55.1%). Over the same quarter, the sale of new commercial vehicles dropped by -23.2%, and in March 2020, demand for new commercial vehicles fell by 47.3% across the EU, as measures to prevent the spread of the coronavirus lead to the closure of dealerships.

In June 2020, registrations of new passenger cars in the EU totalled 949,722 units, a drop of 22.3% compared to the same month last year. Sales recorded a very pronounced falls in all EU countries, with the only exception of France (+1.2%). Over the first 6 months of 2020, registration dropped by 39.5% compared to the same period of the previous year.

Production activity in the EU automotive industry fell year-on-year for the sixth consecutive quarter, i.e. by 16% (after -6.5% in the fourth quarter). The combination of already weakening demand for new passenger cars in Europe and in key export markets such as the US, China and Turkey, uncertainty around WLTP and model changes plus-from mid-March 2020 - the outbreak of the Covid-19 pandemic took their heavy toll on production activity in all EU countries.

Automotive industry forecast 2020-2021 - Due to the onset of the pandemic, the automotive industry has almost completely shut down and production has been suspended all over Europe, with very few exceptions, although some production sites re-opened already in late April. Huge disruption in the supply chain due to lockdowns and blockages in transport across EU countries have made it very difficult to ensure the supply of materials and components to the industry. It remains to be seen if and when normal business conditions are restored in the course of 2020. However, assuming that from the third quarter onwards normal business conditions return, it will take time before new orders translate into new deliveries due to persistent transport and supply chain issues, which will remain in place for some time. In addition, demand for new cars from consumers is expected to remain very weak at least until the macroeconomic picture and consumer disposable income improves. This is another source of uncertainty. In 2021, provided that the industry has been able to restore its production to normal levels, and with WLTP distortions having faded out by then, the launch of new models - many of them electric vehicles - could be a supportive factor, combined with some improvement in real wages and labour market dynamics on the demand side. However, subdued car demand from major markets such as the US, China and Turkey will remain a challenge for EU car exporters. In addition, trade-related risks remain considerable, with possible disputes with the US on tariffs on EU automobiles and automotive parts and components that still hang over the industry. This would continue to impact German and a significant part of the Central European industry, which have extensive trade linkages with the US market and are closely integrated into European auto supply chains. Output in the automotive sector is expected to be hit the most compared to all other steel-using sectors in the course of 2020, with an annual slump of -26% (the most severe on record), followed by a rebound of 25.3% in 2021.

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Posted By : Yogender Pancholi on Wed, 12 Aug 2020
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