The Coronavirus pandemic lockdown that has been implemented all over the United States will impact 2020 vehicle sales drastically with almost an 80 percent drop in buying, say analysts. Credit rating agency Moody’s also lowered the global forecast for auto sales in 2020 and said that sales will fall 14 percent in 2020. This number is much higher than the 2.5 percent fall it predicted in February.
In the US, auto sales saw a decline of 22 percent, and in some cities on the West Coast, the decline was nearly 40 percent, said a research firm J D Powers, based on data it collected from dealerships across the country.
Brace for a significant drop in US Auto Sales in 2020
Light vehicle sales in 2020 are expected to fall at least 15 percent, predicts Moody’s. Again the number has been revised from the previous expectation of a decline of just 1.2 percent. Morgan Stanley said in an investor’s note in early March that US auto sales may drop by 9 percent this year, they revised the figure from 1 to 2 percent drop that they had predicted earlier. Morgan Stanley auto analyst Adam Jonas calls it the “demand shock” of COVID-19. “Lower consumer sentiment will mean consumers may put off the purchase of expensive consumer discretionary purchases such as a ~$35k new car.”
Research company LMC Automotive put the drop at an additional 300,000 this year. It said that US sales are expected to decline to 16.5 million units in 2020. But the figures are before the closure of all manufacturing units in the United States. The number of sales is bound to drop nearly about a million or more, if the pandemic closure persists.
“Forecasts for car markets are likely to be revised down as the public health crisis deepens - especially in Europe and North America,” says David Leggett, Automotive Editor for analytics company GlobalData. “If the global vehicle market decline in 2020 is nearer 10 percent, that will inevitably result in much lower earnings for automotive companies, many of whom are experiencing rising cost pressures formed by the necessity to invest in expensive technologies such as electrification. Indeed, the new stronger headwinds on the global car market come as they face the burden of much tighter regulatory hurdles on CO2, especially in Europe.”
In other places across the world, the predictions are the same. The pandemic, which has killed more than 22,000 people globally, has forced the shutdown of auto plants around the world as entire cities have gone into lockdown to stem the spread of the virus. Moody’s expects the auto sales in Western Europe to see a sharp decline at 21 percent this year. But this number may again go up considering Italy, Germany France, and Spain are all facing a steep rise in Coronavirus cases and deaths. The economy in Europe is bound to take a big hit seeing the spread of the virus in these countries and the complete shutdown of any kind of activity. In the US also the Coronavirus spread has crossed the 82,000 mark of China with the deaths crossing above a thousand.
China, the main supplier of auto parts to the world, saw an 80 percent decline in auto sales itself. With auto production limping back in the region, the supply chain of auto parts is bound to be affected. Any disruption in the global supply chain will impact production the world over through parts shortages. Most automakers are dependent for their supply on China. Most major automakers have a back supply of a month and a half at most. This means, in the US, most major automakers will be facing a shortfall very soon. General Motors CEO Mary Barra said that it has enough supplies to last only through the end of March.
The COVID-19 Coronavirus pandemic will erase as much as $2.7 trillion from the total global gross domestic product in 2020, according to analysts.