London – Global car markets are showing a “classic V-shaped” recovery from the coronavirus crisis in both sales and production, according to LMC Automotive said.
But the impact of the pandemic will continue to be felt for years to come, said LMC, which is now forecasting that global light-vehicle sales will be 75 million this year, a 17% drop from 90 million in 2019.
The global figure is an improvement of four million units from May, when LMC was forecasting total sales would be just 71 million for the year. In April, LMC said sales could be as low as 70 million units.
“It’s been a fast rebound,” Pete Kelly, LMC Automotive managing director, said in an online presentation earlier this month.
The seasonally adjusted annual selling rate, or SAAR, in July and August was about 98% of last year’s total. The selling rate hit a low point of 49% in April, representing the bottom of the "V shap," Kelly said.
But, he cautioned, “there has been a lot of lost volume – 11 million units is the net loss so far,” as a result of lockdowns around the world that restricted movement and closed dealership showrooms.
“The speed of the recovery has been surprisingly strong,” he said, due largely to pent-up demand, economic stimulus programs and, to a lesser extent, incentives.
European sales are predicted to be 16.5 million, down 20% from 20.7 million in 2019. North America sales will be 16.4 million, LMC said, a 19% drop from 20.2 million; China is predicted to fall 7.5%, from 25.5 million sales to 23.6 million.
“The question is how well that level of sales -- which is mostly normalised -- can actually be sustained,” Kelly said. “We think that sustaining the rebound will be difficult.”
Kelly offered a number of reasons why a post-lockdown surge in demand may taper off:
• Deliveries from orders placed before lockdowns will be fulfilled, and several months of pent-up demand will have been absorbed.
• Inventory correction: A number of countries use wholesale data to tabulate sales, and inventories are decreasing, Kelly said.
• Incentives are starting to end or be cut back, although there could be a spike in sales just before they conclude as buyers rush to take advantage.
• A second wave of the coronavirus could lead to more lockdowns, as is already being seen in parts of Australia.
• Macroeconomic conditions may worsen as government stimulus programmes end.
“These are not only plausible risks; they're very likely to happen and they're all negative,” Kelly said.
Reflecting those risk factors, LMC is forecasting that global sales will be 83 million in 2021, an 11% increase – but still nearly 8% below the 2019 figure. European sales are expected to be 19 million in 2021, a 15% improvement from 2021, but an 8.2% decline from 2019.