Stop car: the global car market could collapse by almost a quarter in 2020

In 2020, the global car market may face one of the largest crashes in history. This conclusion was reached by experts of the consulting company LMC Automotive.

According to the organization’s study, as a result of the coronavirus pandemic, car sales in the world risk falling by at least 15% (from 90.3 million to 76.6 million units). Moreover, if the active spread of the infection continues in the second half of the year or if a new outbreak of infection occurs in the third or fourth quarter, then by the end of the year the market may collapse immediately by 23% - up to 69.4 million.

As expected, the pace of decline may be several times higher than the figures recorded during the years of the global financial crisis. Then, from 2007 to 2009, sales of passenger cars in the world fell by only 8.7% - from 70 million to 64 million.

“A lot of component manufacturers closed their production in Europe, North America and Asia, as measures to limit the movement of the population were introduced to slow down the spread of the virus. A significant increase in unemployment is expected around the world, which will negatively affect large purchases, such as vehicles, ”says the LMC Automotive study.

According to official data from the World Health Organization (WHO), the total number of coronavirus infected in the world exceeds 465 thousand, of which more than 21 thousand died.

The spread of the disease and quarantine measures introduced by states have already provoked a massive reduction in the volume of trade, production and passenger traffic in the world. According to the forecast of the Institute of International Finance (IIF), in 2020 the volume of the global economy may decline immediately by 1.5%.

“Quarantine measures covered more than 2.6 billion people around the world, that is, more than a third of the world's population. This affected not only auto sales, but also the entire global economy. The most acute situation with a drop in demand for cars is now observed in Asia, Europe and the USA, ”explained Artyom Deev, head of the AMarkets analytical department, in an interview with RT.

Recession leaders

According to LMC Automotive, almost two-thirds of the total global car market drop is in China, North America and Western Europe. Even if the global coronavirus epidemic can be stopped in the first half of 2020, vehicle sales in each of the three regions will decrease by about 3 million.

According to RT analysts surveyed, at the beginning of 2020, a serious blow to the global car market was a drop in demand and production in China, which accounts for almost a third of all vehicle sales in the world. According to the estimates of the China Association of Automobile Manufacturers (CAAM), from January to February, the market for passenger cars in China declined by almost 44%.

As the coronavirus spreads, in the coming months, the largest countries - European car manufacturers, as well as the United States - may face similar dynamics. This point of view in an interview with RT was expressed by the director of the sales office of BCS Broker Vyacheslav Abramov.

“The problem will be especially acute in Europe, where the situation with the coronavirus began to develop faster than in China, and quarantine measures were taken much later. In February, the German auto industry fell by almost 11%, Italy - by 8.8%, Spain - by 6%, and France and Great Britain - by 3%. In the United States, emergency mode has already been introduced in 12 states. Given the approaching summer and the Americans’ love for car vacations, in the absence of positive news with coronavirus, sales can also be noticeably reduced, ”Abramov explained.

• A General Motors assembly worker works on assembling a V6 engine, used in a variety of GM cars, trucks and crossovers, at the GM Romulus Powertrain plant in Romulus, Michigan, US
• Reuters
• © Rebecca Cook

Against the backdrop of the massive introduction of quarantine measures and the closure of enterprises, large automobile companies thought about re-equipping their factories for the production of medical equipment. As a result, production and sales of cars can be further reduced by the end of the year, said Alexei Krichevsky, an expert at the Academy of Finance and Investment Management.

“Now more and more news is appearing about the re-profiling of a number of automobile manufacturing plants for today's needs. So, factories Ford and General Motors in the USA began to produce masks and mechanical ventilation devices, as well as Tesla. A similar story now and in the rest of the world - the factories of China and Britain are also hastily redesigning, ”Krichevsky said in an interview with RT.

However, by the end of 2020, the global market decline may slow down somewhat as the Chinese economy recovers, says Artyom Deev. Over the past few weeks, the pace of the spread of coronavirus in the country has virtually stopped. Moreover, on March 25, the PRC authorities lifted the quarantine regime from Hubei Province, which was originally a hotbed of infection.

Against this background, analysts highly appreciate the likelihood of a quick restart of production in the country. Already now, according to the Ministry of Industry and Information Technology of the PRC, 71.7% of small and medium enterprises have restored economic activity.

According to LMC Automotive, the growth of the global car market will begin only in 2021, and the volume of vehicles sold may increase by 10-12%. However, according to company experts, sales will still remain below the level of 2019.