Fuel for Thought: The COVID Recovery
Automotive Monthly Newsletter and Podcast
This month's theme: The Covid Recovery
We live in unprecedented times. The spring of 2020 has been
likened to 1918, when 500 million people, or about a third of the
world's population at the time were infected with the Spanish flu,
or the Great Depression when worldwide GDP fell by an estimated
15%. But the difficult-to-absorb fact is that, for the first time
in recorded history, we are experiencing the turbulence and
uncertainty of multiple catastrophes simultaneously.
The automotive industry is not immune and is currently facing one of the most significant disruptions in its history.
Nowhere is that more evident than in Europe. The IHS Markit forecast for West Europe calls for a 25% decline in 2020 and modest growth in 2021, based in part on a weak base in 2020. From a production perspective, major West Europe countries will inch closer to pre-crisis output rates by July with Germany leading the way; production levels will approach 85% of pre-crisis levels. Most European countries have loosened containment restrictions, yet some consumers remain very cautious.
China leads global markets in the still relatively early stages of recovery from the significant impact of the COVID-19 pandemic. As demand recovers, automakers are working diligently to maintain inventory alignment, further evidenced by recent robust production results. The Greater China market has seen a resumption of economic growth, and output has achieved solid momentum. New vehicle deliveries are forecast to decline 12% this year but then climb by 9% in 2021, again due in part to a weak base. Light commercial vehicle demand and production in China recently have been propelled forward in large part by significant investment in infrastructure construction funded by the central government.
Looking to the United States, IHS Markit forecasts that US new light vehicle sales in 2020 and 2021 will reach 13.3 million and 14.6 million units, respectively. Despite a very challenging economic environment, US retail demand for new vehicles has proven a bit more resilient than was originally expected.
IHS Markit US registration data indicate that the mix of households returning to market this past March contrasted sharply with the pre-COVID mix. Specifically, US households that returned to market this year, when compared with their counterparts a year ago, were:
- More likely to own a light truck than a car
- More likely to own a domestic vehicle than an import-branded vehicle
- More likely to own a pickup than any other body style
- More likely to live in a smaller designated market area (DMA) and a rural state
- More likely to be older and Western European
- More likely to purchase than lease