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Car Sales Fall To 10-Year Low

An article in the Financial Times reviews the fortunes of parts makers Infineon (formerly part of Siemens), Continental and Osram, all of whom suffered last year as falling auto production depressed earnings.

China, in particular, suffered a sharp fall in electric and hybrid vehicle demand when subsidies were removed last October. Global sales of internal combustion engine (ICE) vehicles were down, as IHS Markit reported 10 million fewer vehicles would be produced in 2019 than previously thought.

IHS’s data showed light vehicle production dropped in all regions in October, with China registering a 13% fall. Just 90 million cars are expected to be manufactured worldwide this year.

So, the industry was not in the best of shape coming into 2020. Even before COVID-19 struck, car parts companies were looking to reduce headcount. Now, automakers up and down the supply chain are furloughing staff at an unprecedented rate and shoring up balance sheets by drawing down on credit lines while they are still open.

A separate Financial Times report stated General Motors and Ford have both drawn $16 billion and $15.4 billion from their credit lines, while Germany’s Daimler on Thursday opened a fresh €12 billion credit line on top of its existing €11 billion facility.

Car sales across western Europe fell about two-thirds last month, according to country-by-country data published by the Financial Times, while U.S. car sales in March fell to the lowest level in 10 years. Not surprisingly, as lockdowns consolidate, both markets are expecting even steeper falls in April.

In the U.K., all major carmakers have closed and the operator of the largest factory, Nissan, placed all of the 6,000 production staff at its Sunderland plant on a furlough scheme (through which the U.K. government pays 80% of their salaries).

Premium: Where Does Oil Go After The Largest Production Cut In History?

The financial toll on the industry will be colossal, albeit at present hard to asses.

Volkswagen’s chief executive, Herbert Diess, is reported as saying the German carmaker faced a bill of €2 billion a week in costs. The Financial Times quotes a figure of more than U.S. $100 billion in lost revenues for the European and North American car industry, suggesting lost sales in Europe are forecast to rise to 2.6 million units worth €66 billion (U.S. $73 billion). Meanwhile, North America will hit 2 million units worth about U.S. $52 billion if closures stay in place throughout April. Ian Henry owner of research group AutoAnalysis, was quoted by the FT as saying that after April, every week thereafter will cost €8 billion (U.S. $9 billion) in Europe and U.S. $7.5 billion in North America.

Not surprisingly, carmakers are working furiously to see if they can bring production back onstream in some plants — although who will buy them and through what sales channel they will be marketed remains to be seen, as most distributors have likewise closed down in the absence of buyers.

Carmakers are said to have closed due to workers’ fears of infection. Car plants are environments in which workers often operate in teams and work in proximity. It is difficult to see how such working practices can be changed to accommodate safe distancing.

During China’s lockdown, sales dropped to almost zero. Europe and North America likely have a similar fate ahead of them before seeing a recovery in the second half.

By Stuart Burns via AG Metal Miner 

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Leave a comment
  • Mark Potochnik on April 11 2020 said:
    Did they forget to mention Tesla's record 1st quarter? As 1st quarters go. If it wasn't for the virus, it would have been a record quarter period.
  • Andrew Doolittle on April 11 2020 said:
    Looking at North American sales through the site goidcarbadcar.com one can witness numerically a truly awesome collapse no doubt. Having said that sales of select vehicle Brands such as Tesla and to some extent Subaru and Hyundai have held up well.

    Jaguar and Mercedes Benz still have not even reported numbers so I'm not sure what to make of that.

    Sales in Europe can collapse to zero because of the extant nature of public Transportation there. In the USA there are abandoned rail rights of way that can quickly be repurposed for non auto transit but of course as well there is Tesla which if full autonomy is realized can move certainly the entire US population from point to point and back again for not much more than a need to change the tires every 500,000 miles.

    The most critical need for the Global Economy at the moment is for the US Domestic Airline Industry to get back up and running...which I think is very much a do-able event. In other words KEEPING cars off the highways is critical right now in order that Farms and Trucks can utilize roadways for agricultural and logistical purposes. That's hardly bad news for the energy Industry at all.
  • Bradley Steeg on April 11 2020 said:
    China's car sales recovered. But China is lying about infection rates. Which means they're going to crash and burn.
  • Norman Clark on April 13 2020 said:
    Have not driven for weeks. And you know what.....I don’t miss it at all. Use my healthy bike. Oil prices could double.....couldn’t care less.

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