Motor Industry may never recover to pre-COVID-19 levels warns ECG report

359

The motor industry worldwide is facing an unprecedented fall in volumes in 2020 as a result of the COVID-19 pandemic. It is facing many years of stagnated growth, with the distinct possibility that recent volumes may never be achieved again.

That’s the sobering warning in a report by the Association of European Vehicle Logistics’ (ECG) Business Intelligence initiative presented at its recent online 2020 General Assembly.

The ECG report, presented in collaboration with Automotive from Ultima Media, predicts that automotive sales (comprising passenger and commercial vehicles) will fall by 15% globally in 2020 as a result of the Coronavirus pandemic. To put that into perspective, sales fell by only 8% after the financial crash of 2008/2009.

In Europe an even more severe decline in sales of 19.6% is expected compared to 2019. That equates to a fall in production of over 3 million units compared to 2019 to just over 14 million units. A worst case scenario could see the market crash by as much as 23.5% this year.

The next couple of years are expected to be equally challenging, with vehicle demand predicted to fall by around 1.7 million units in 2021 and 1 million units in 2022. Although figures are expected to recover in the years after that, the report still predicts that right up to 2030 volumes will remain around 200,000 units a year less than the predicted Business As Usual (BAU) figures prior to COVID-19.

With manufacturers in some countries tentatively restarting production in the past couple of weeks, the report says that what happens in Q3 and Q4 is critical, with a huge question mark in consumer confidence. The report notes that thus far the restart of production has been mostly smooth but major challenges remain ahead with supplier issues, logistics network disruptions and questions over future plant capacity.

Supply chain providers are facing challenges that include high inventory levels leading to temporary storage challenges, disruptions to the logistics network such as cross-border delays, and transport asset utilisation challenges due to low capacity, with many outbound logistics providers facing a liquidity crunch.

The report identifies that the motor industry is going to face many challenges in the coming years and months, with consolidation likely to become more common to improve financial resilience, reduce costs and mitigate supply chain risk. In the medium term, investment in developments such as autonomous vehicles and connectivity is likely to be scaled back. However it notes that EV uptake is increasing faster due to the crisis, and with governments likely to introduce stimulus packages such as scrappage schemes / subsidies to incentivise the uptake of EVs, this may help OEMs to achieve emission targets almost by accident.