IHS Markit cuts Italian light-vehicle sales forecast on COVID-19 virus outbreak
IHS Markit has cut its sales forecast for the Italian light-vehicle market on the back of the coronavirus disease 2019 (COVID-19) virus outbreak that has now hit the country. For 2020, we currently expect sales to retreat by 14.4% year on year (y/y) to 1.8 million.
This decision has been taken on the back of the lockdown and quarantine measures that have been implemented in the country. These were first introduced for 12 towns to the southeast of Milan (Italy) in late February and initially affected around 50,000 people. This already led to a reduction in footfall to dealers on reduced confidence and concerns which would have already led to reduced orders in the coming months, while the impact on tourism would likely have led rental fleets to reconsider renewal programmes. However, the lockdown was expanded on 8 March to include the entire population of the Lombardy region and a further 14 provinces - Modena, Parma, Piacenza, Reggio Emilia, Rimini, Pesaro and Urbino, Alessandria, Asti, Novara, Verbano Cusio Ossola, Vercelli, Padua, Treviso, and Venice - and prevented travel in to or outside these areas without special permission, hitting around 16 million people.
As of today (10 March), the Italian government is now implementing a country-wide lockdown. Under the measures described by Prime Minister Giuseppe Conte as "I stay at home", citizens have been called on to remain at home to prevent the further spread of the virus. This will also suspend sports events, and schools and universities are closed until 3 April. Only those with a valid work or family reason allowed to travel, with controls to check temperatures of passengers at train stations.
Outlook and implications
The expected impact of the COVID-19 virus outbreak in the market comes on top of the challenges already facing the Italian light vehicle market from existing macroeconomic situation, characterised by nervous households, struggling exports, weaker investment trends, and a lack of scope for major fiscal stimulus in 2020. Under this scenario, IHS Markit had already been expecting light-vehicle registrations to fall by 1.8% y/y during 2020. However, following the widening of measures, IHS Markit's March macroeconomic forecast update will now anticipate a longer and deeper recession.
The decision to implement a national lockdown which is expected to have a bigger and longer-lasting impact on the economy has also caused us to revise our forecasts for the coming years. Although we expect the light-vehicle market to grow by around 5.5% y/y during 2021, volumes will be 1.9 million units, a level previously reached in 2015-2016 as the market recovered from the European financial crisis, while it will not break through the 2-million-unit barrier until 2022.
Despite the challenges of the latest restrictions, automotive production in the country appears have been unaffected yet. Indeed, Ferrari, which is based in the province in Modena, yesterday (9 March) announced that it has confirmed its "operational continuity" and Maserati production at Modena had already stopped to allow work to be undertaken to bring to market a new model, and only essential staff are being called in. Pirelli was quoted by Dow Jones Institutional News yesterday as stating that production personnel are working at plants in Settimo Torinese and Bollate, the latter in the quarantine zone implemented at the weekend. Although the latest measures will now take in major facilities for Fiat Chrysler Automobile (FCA) in the country, they do not seem to prevent production from continuing. For now, perhaps the biggest challenge to domestic light-vehicle production is weaker demand both domestically and in the rest of Europe.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.