Temporary Low Demand: How Coronavirus Impacts Car Sales in Europe

By Tyrone Furrer Published on May. 18, 2020

The economic cost of the global pandemic is continuing to mount, disrupting markets all around the world, and the automotive industry has been hard-hit. As stated in the recent report of the European Automobile Manufacturers Association, last month the EU passenger car market recorded a dramatic drop of 55.1% in registrations of new vehicles as a result of the COVID-19 outbreak.

From all 27 European markets, some countries experience the biggest market bearishness. Italy almost bottoms out with car registrations falling by 85.4% to 28,326 new cars, compared to 194,302 units in March 2019. Likewise, demand also collapsed in France (-72.2%) and Spain (-69.3%) last month. Germany recorded a less extreme drop than other key markets, but registrations fell by 37.7% nevertheless.

European Car Manufacturers are Shifting Gears to Address Coronavirus

Car Sales in Europe

Most European automakers have had to take extreme measures to prevent the spread of coronavirus by significantly reducing production or closing factories. This is how leading manufacturers have responded in Europe:

Volkswagen – The world’s biggest automaker, announced the temporary closure of all European plants in March. The facilities produce cars under brands including Volkswagen, Audi, SEAT, Ducati, Porsche and Lamborghini. On April 27th, Volkswagen reopened its Wolfsburg plant, one of the biggest auto-manufacturing plants in the world, although with a lot of changes and adapting the production to lower demand. 

Renault – Shut down all 12 of its French plants under the country’s strict lockdown. On April 22, Renault started to reopen plants in France, although with large limitations and rigid rules. 

PSA Group – Announced the closure of plants in France, Spain, Poland, the UK, Portugal, Germany and Slovakia, until at least March 27. Since the last week of April, PSA Group started to reopen plants in the countries where they were allowed to do so. 

Fiat Chrysler – Suspended production at factories in Italy, Serbia and Poland. The first week of May, Fiat restarted production in their Van plant in Atessa. 

Ferrari – Suspended production at its Italian Formula 1 and road car plants. After nearly two months of lying idle, they have now reopened and resumed production, with rigorous safety protocols.

Daimler – Will be shutting down the “majority” of its production in Europe. On April 20, they gradually restarted production in some factories.

Ford – Shut down the main manufacturing facilities in continental Europe. Production started slowly in May to open some factories in Germany, Spain & Romania. 

BMW – Declared to close all European factories at least until April 19. Reopened first engine manufacturing plants starting the last week of April, with following openings of other plants across Europe in the next weeks. 

While the primary reason for the closing of the production was to protect its workers and prevent the spread of coronavirus, big players just as Daimler expect a “period of temporary low demand”, so the production break should help to protect companies' balance sheets. 

The European Car Market Could Return To Its 2019 Levels Only By 2030

Car Sales in Europe Predictions

The ultimate impact of the coronavirus crisis on European automakers is, of course, yet to be determined, but everyone agrees that sales will drop. Ferdinand Dudenhöffer, responsible for automotive analysis at the University of St. Gallen in Switzerland, declares that even under an optimistic scenario, which assumes no bank failures and the start of a recovery for the European economy after three months or so, the European market for passenger cars will return to its 2019 levels only by 2030. 

He finished his forecast stating that the European car industry is facing three major challenges:

  • first, the corona epidemic and the slump in the European auto market triggered by corona;
  • second, the detrimental effects of the trade wars of the U.S. President Donald Trump; 
  • and third, the switch to electromobility, which requires high investments.

While Europe is still under shock, China is restarting most of its plants, with hopes that the corona crisis is close to an end. However, local car manufactures' sales have been hit hard by the virus. In February, Geely saw a 75% drop in sales, while Great Wall saw an 85% drop.

The sales drop in China this February can be used to forecast sales in Europe. However, the prediction will only work during the lockdown. In the end, if the majority of people can not leave their houses without any good reason, why should they invest in a new car?

What Will 2020 Be Like For European Manufacturers?

The real uncertainty comes when we want to forecast sales after the lockdown. How many people will be able to purchase a new car? And those who will be able will now have several alternatives to “own” a car in a traditional way such as micro-mobility, car-sharing, short-term rentals, etc. Also, it’s important to know how this will finally impact employments and contractors. For now, most of the cuts in human labor are temporary, in this case hitting harder the contractors, but it’s still uncertain how many of these temporarily fired people will be re-hired and when. 

But there is also good news for the automotive industry: Before the COVID-19 crisis, the demand for public transport was increasing. However, this situation completely reversed that, and now the demand for private vehicles has increased again. People will value the possibility of owning a private vehicle so they can travel without being exposed to the virus.

2020 will be a difficult year for car manufacturers in Europe. The applied strategies of the big players in the industry, the support of Governments, and last but not least, the duration of the outbreak of COVID-19 will determine the success of the year. 

In Plug and Play, we actively support our Corporate Partners to help them through these difficult times. We have been very active in the last weeks, with webinars on reducing costs and automation tools, including pitches of startups that address these solutions. We also released an ebook about “Reopening Manufacturing Facilities”, that showcases 14 technology categories and 101 companies that could help in the process of resuming business operations.

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