New Covid-19 lockdowns imperil European car sales recovery

Paris – The second wave of the coronavirus pandemic in Europe will dash hopes for a sales recovery toward the end of the year, analysts say.

Showrooms will be closed for at least the month of November in France and England, while curfews and movement restrictions in markets such as Germany, Italy and Spain are cutting into dealers' foot traffic. 

Car buyers may also put off purchases until 2021 amid renewed economic worries. 

The effect of rising case numbers has already appeared in October sales, which fell in the EU’s five largest markets – Germany, the UK, France, Italy and Spain – after rebounding over the summer months. 

"While we are still assessing some of the details, lost sales [in Western Europe] could amount to 300,000 to 400,000 in the final couple of months" of 2020, said LMC Automotive analyst Jonathon Poskitt. He noted that a second wave and renewed lockdowns were "always a serious threat."

LMC Automotive's latest forecast calls for full-year Western European sales of 10.58 million units, a 26% decrease from the 14.3 million vehicles sold in 2019. That is a downward revision from early October, when LMC forecast sales of 10.92 million units in the region, a decrease of 24% from last year.

"There are certainly reasons to be concerned with the near-term health of the car market in light of this," Poskitt said in an email, "both directly through the closing of showrooms (and therefore restricting this tried-and-trusted channel of sales), and indirectly through the economic consequences of further lockdowns, risks to jobs and the hit to consumer confidence."

The consequences in France could be severe, said Lorraine Morard of IHS Markit in Paris. "We foresee a decline of about 67%" in November, she said, adding the decline would be less than in April, when French sales fell by 89%, because dealers are better prepared.

Sales totals will be boosted somewhat by online purchases, deliveries of vehicles already ordered and orders for commercial vehicles, she said. 

Citing a government source, Reuters reported Friday that new car orders had fallen 70% to 90% since the lockdown was imposed. The government is also considering extending enhanced financial supports for car buyers until July rather than ending on 31 Dec, Reuters said.

The pain could extend well beyond November. While the French government has not yet decided whether to prolong a national lockdown past 1 Dec, Morard said December sales would most likely decline by 25%. 

"People will remain worried and could postpone their purchases onto 2021 or go for used cars instead," she said in an email. "December will definitely see some postponed purchases from November, but this will not be enough to see growth for the last month of 2020."

In light of the second wave of Covid-19, Poskitt said LMC was taking a pessimistic view of 2021.

"While it will be difficult to predict the exact timing and nature of further restrictions, we have lowered the forecast in the first half of the year to acknowledge this increasing likelihood," he wrote. 

LMC is now predicting an 18% improvement in 2021, to 12.5 million units. That figure is still 13% below 2019's total.

Online purchases and "click and collect" deliveries, allowed in England and France, could offset some lost sales, however, automakers and analysts say.

"While the continuation of click and collect and delivery services is welcome, and should help prevent a return to the sales wipeout experienced in the spring, it cannot offset the loss of custom from the closure of showrooms themselves, given the unique nature of the car purchase process," the SMMT UK lobbying group said in statement this week.

"What is not in doubt, however, is that the entire industry now faces an even tougher end to the year as businesses desperately try to manage resources, stock, production and cashflow in the penultimate month before the inevitable upheaval of Brexit," SMMT CEO Mike Hawes said in the statement.

Focus on digital sales and deliveries

Automakers expressed varying degrees of worry. BMW issued a warning on Wednesday, even as the automaker confirmed a full-year profit.

"The pandemic is now clearly regaining momentum," BMW said 4 Nov in a statement. If it worsens and drags down the global economy, "the risk exposure could be considerable, particularly on the demand side."

Bjorn Anwall, Volvo’s sales boss for Europe, the Middle East and Africa, said the automaker was counting on digital sales and staying in contact with customers by telephone to minimise the impact on sales. 

"Yes, there is the risk that we will face more partial closure in the coming months, but we are prepared to do handle this in a safe way while keeping the business open, if not physically open then digitally open," Anwall told Automotive News Europe.

Renault's sales director for France, Ivan Segal, said his network was focused on delivering vehicles ordered before the most recent lockdown, which started on last week.

"Our objective is now to aim to deliver 100% of our orders, which will make it possible to avoid the cash flow problems suffered by the network during last spring,” Segal said in an interview with the French website JournalAuto.com. 

Like Volvo, Renault will do it all it can to stay in contact with sales leads and customers during confinement.

"We will use all the distancing tools at our disposal to respond to prospects, all digital means for processing leads, and we will ensure that each of the leads sent to the network is processed immediately," Segal said.

Matt Harrison, executive vice president of sales at Toyota Europe, told Automotive News Europe that Toyota and Lexus had an order bank of about 190,000 vehicles, more than two months of sales. "We would like to fulfill those orders as best we can," he said. 

"The situation is very fast changing at the moment," he said added. Harrison said that about 30% of Toyota's European markets were in a "restricted capability," meaning that buyers could not walk into a showroom, test drive a car or pick it up after purchase.

In the UK, Harrison said, the impact of restrictions in the fourth quarter could be about 10,000 vehicles in absolute volume terms.

Douglas A. Bolduc and Luca Ciferri contributed to this article