The global auto industry has been hammered by the coronavirus pandemic but is proving to be one of the engines of economic recovery, analysts with IHS Markit said during a media webinar Thursday.
Worldwide vehicle sales are likely to end the year off by more than 16% compared to 2019 levels but should post a reasonably strong recovery next year. But it is likely that the industry won’t reach pre-COVID levels of demand until at least 2023, IHS research suggests – and there are a variety of “risks” that could put a full recovery even further off into the future.
“The hope is that a V-shaped recovery will come quickly,” said Colin Couchman, the research firm’s director of global automotive sales research, but “the downside risk” starts with the possibility of a worsening pandemic, especially if vaccines fail to bring it under control. Even now, he said, there is “a big concern in Europe” that a second wave of infections could trigger a W-shaped downturn with further lockdowns and, perhaps, additional factory closures.
The industry was hit with an unprecedented crisis earlier this year that led to closures of auto plants in most key manufacturing centers. That included a two-month shutdown in North America between March and May.
Worldwide sales are expected to end that year at around 76.5 million, down 16% from the 89.7 million vehicles sold during 2019. The industry peak, set in 2017, was 94.3 million. With demand rising in recent month in most key markets, IHS expects global numbers to climb back to 83.4 million in 2021 and, by 2023, to reach 89.7 million.
The U.S. will finish 2020 off in a slightly deeper hole, sales down 16.4%, at 14.56 million, forecast Chris Hopson, who focuses on North American sales. The research firm expects that to rise to 16 million next year, again well off from the U.S. peak set last decade. It will likely be mid-decade before a full rebound occurs.
Nonetheless, the trend is in the right direction, said Hopson. “Consumers have really helped drive much of the recovery we’ve seen. People with money in their pocket are using it and spending.”
Echoing his colleague, Hopson said there are a number of factors that could cool off the recovery across North America, including the worsening pandemic infection and death rates.
It’s not just the risk that consumers might rein in spending. Rising infection rates raise “concern(s) that the number of cases increase absenteeism” and impact production in North American and other parts of the world, said IHS analyst Nark Fulthorpe.
The spring plant closures have resulted in inventory shortages, notably with hot selling SUVs and pickups. And even as manufacturers struggle to catch up they’ve faced delays triggered by COVID. Parts shortages led GM to cut production at several plants last month, while Ford has pushed back the launch of its new Bronco model from spring to summer 2021 due to problems getting enough of the SUV’s removable roofs.
But COVID-19 isn’t the only reason to be concerned, the researchers warned. They also pointed to a worsening shortage of the semiconductors that are becoming more and more every year as automakers add an increasing level of digital technologies to their vehicles.
“Demand in the consumer sector is bumping into demand from other sectors,” said Fulthorpe.
Other risks include ongoing trade wars, notably between the U.S. and China and, other analysts have noted, raw materials prices.
All in all, said Couchman, “ It is probably quite fair to say we expect a slow recovery for the auto industry.”