- We now forecast a steeper decline in global heavy-duty truck sales than we previously anticipated as the COVID-19 pandemic leads to a global recession in 2020.
- We now project global sales of heavy-duty trucks will decline by 20%-30% in 2020, to about 1.7 million units from 2.3 million in 2019, followed by a sales recovery of up to 10% in 2021.
- Across all regions, we expect that the downturn in 2020 will be worst in the U.S., as it often exhibits deeper cyclical troughs.
- We expect global truck makers and suppliers will face intense pressures on their operating profits and cash flows, which will test the headroom in their credit metrics and liquidity management.
While China appears to be gradually recovering after the imposed lockdown due to the COVID-19 outbreak, other regions are still testing their ability to curb the virus. Our expectations for the global commercial vehicle market will likely evolve throughout the second quarter (Q2) of 2020 as more information becomes available. We acknowledge that there is a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak about midyear, and we are using this assumption in assessing the economic and credit implications. We believe the measures adopted to contain COVID-19 have pushed the global economy into recession (see our macroeconomic and credit updates here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.
Based on our macroeconomic forecasts, we expect a material decline in truck demand globally as customers postpone and cancel orders. We expect this decline will be particularly severe in the second quarter of the year, only gradually recovering thereafter, provided restrictive measures are effective in slowing contagion. Apart from the expected GDP declines, we believe other key factors will influence heavy-duty truck demand, such as the average fleet age and regulatory actions.
Under our scenario, we now forecast global heavy-duty commercial vehicle sales will decline by about 20%-30% in 2020 to about 1.7 million units. This compares to 2019 sales of 2.3 million. For 2021, we expect sales volumes to recover globally by between zero and 10% (see table 1).
|Global And Regional Heavy-Duty Truck Sales Year-On-Year Changes (%)|
|*LMC data. **S&PGR forecasts.|
In response to fading demand and supply-chain shortages related to the Chinese market shutdown and difficult deliveries, the vast majority of global truck manufacturers announced production shutdowns of their plants in Europe and in the U.S. in Q1, and have switched to liquidity protection mode in anticipation of a sharp decline in Q2. Some companies, for example, have cancelled dividends, secured additional committed lines, and are carefully evaluating capex and costs.
Currently, global truck manufacturers are testing their production and supply chains, and have either already started to gradually reopen plants, or expect to do so. Nevertheless, we expect intense credit pressures ahead for truck makers. We believe that potential government stimulus packages and central banks' action to facilitate access to funding will only partially relieve these pressures.
In the eurozone, we now expect real GDP to fall by 7.3% in 2020, after 1.2% growth in 2019. In 2021, we forecast eurozone GDP will rebound to 5.6%. On the back of this, we believe heavy-duty truck sales in the region are likely to decline by between 30% and 40% this year, depending on the speed of recovery in the second half of 2020. For 2021, we expect pronounced growth ranging between 15% and 25%, but not enough to fully cover 2020 volume losses.
In the U.S., revised real GDP forecasts indicate a decline of 5.2% in 2020, after 2.3% growth recorded in 2019. For 2021, we now expect real GDP to expand steeply by 6.2%. Given the already bearish environment in the heavy-duty truck market, which even before the COVID-19 pandemic was suffering from oversupply, we now forecast a 50%-60% decline in 2020 sales volumes, nevertheless resulting in volumes in absolute terms still above 2009. We forecast sales volumes will improve in 2021 in the range of 30%-40%.
Despite evidence of a recovery in China, under our revised macroeconomic assumption, we think it is likely that real GDP for APAC will grow by just 0.7% in 2020, after 4.8% growth recorded for 2019. This would translate into a decline in commercial vehicle sales by about 10%-20% this year. For the moment, we see real GDP growth of 6.3% in 2021. However, we still forecast another sales contraction for heavy-duty trucks in APAC in 2021 of up to 10%. We expect demand to further soften in China from a high base created in 2017-2020. This is mainly because of the recent fleet expansion after regulation changes and the scheduled implementation of higher emission standard in 2021.
- COVID-19 Will Batter Global Auto Sales And Credit Quality, March 23, 2020
- COVID-19 Deals A Larger, Longer Hit To Global GDP, April 16, 2020
This report does not constitute a rating action.
|Primary Credit Analyst:||Marta Bevilacqua, Milan + (39)0272111298;|
|Secondary Contacts:||Grant Hofmeister, New York + 1 (212) 438 8855;|
|Chloe Wang, Hong Kong + 852-25333548;|
|Vittoria Ferraris, Milan (39) 02-72111-207;|
|Robyn P Shapiro, New York (1) 212-438-7224;|
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