Market Insight: European recovery underway

THE European automotive market is showing the first signs of recovery from the collapse caused by the coronavirus pandemic this year, with official passenger vehicle sales results released last week pointing to a sharp, but less painful, 52.3 per cent downturn in May across the 27 EU member states.

The fall from 1.2 million units in May last year to 581,000 last month remains the worst result in the two decades since the European Automobile Manufacturers’ Association (ACEA) began collecting the data, and deepens to 57.2 per cent when new-vehicle registrations in the UK and European Free Trade Association (EFTA) members are included. 

However, the drop is less dramatic than in April when car sales plunged 76.3 per cent in the EU, and, following three months of unprecedented declines across the region, places the market contraction for the year to date at 41.5 per cent.

The equivalent April/YTD figures for the EU, UK and EFTA combined are -79.8 and -43.5 per cent respectively. 

Hastily prepared government incentives in several markets have followed the reopening of dealerships and gradual easing of social restrictions.

Yet the ACEA and other peak industry bodies were still moved to issue an urgent joint plea last week to all EU heads of state and government to provide “co-ordinated EU-wide demand-stimulus schemes for all vehicle types and categories” in an attempt to “mitigate the effects of the major economic crisis on our sector”.

Double-digit declines were recorded in every EU market last month, while the UK suffered another shocking result – plummeting 89 per cent – as lockdown measures continued.

Just 20,247 passenger vehicles were delivered in Britain as ‘click and collect’ services at dealerships were allowed from mid-May and produced some movement in the market, but this was still more than 163,000 fewer registrations than recorded in the same month last year – and the UK’s lowest May result since 1952. 

For the year to date, the UK new-car market (excluding commercial vehicles) is down 51.4 per cent.

Among the four major EU markets, Spain saw the biggest decline (-72.7%, to 34,337), while sales were basically halved in France (-50.3%, 96,310), Italy (-49.6%, 99,711) and Germany (-49.5%, 168,148), the latter still standing as the biggest market in the region by a long shot.

From January to May, Germany is also faring much better than the other EU heavyweights, down 35.0 per cent for the first five months compared to Spain (-54.2%), Italy (-50.4%) and France (-48.5%).

Among the other major players, Belgium has dropped 35.7 per cent this year (-32.0% in May), the Netherlands has limited the damage to 27.9 per cent YTD (despite -59.2% in May), the Czech Republic is down 30.3 per cent (-44.4% last month) and the key Scandinavian markets of Sweden and Denmark have kept the declines to -25.8 and -30.6 per cent respectively (-50.2%/-40.1% in May).

A drawn-out recovery in Europe is all but certain as auto manufacturers attempt to match their rekindled production with uncertain demand – all the while maintaining a virus-free workplace.

LMC Automotive is among the consulting firms expecting the recovery in vehicle demand across Europe to be a long process “due to the pandemic’s deep and enduring impact on the economy, which is expected to take several years to return to pre-COVID-19 levels”.

AlixPartners also released its latest global automotive outlook this month, which predicts the car industry worldwide will reach only 70.5 million sales this year – down from 89 million last year – with Europe’s recovery netting 14.1 million units for the full calendar year, a fall of 32 per cent from the 20.6 million new cars registered last year. 

This is a bleaker outlook than some other analysts have predicted – LMC, for example, has targeted a 26 per cent fall across western Europe this year – and is based largely on the fact that some of the EU’s most important markets have been arguably hardest hit by COVID-19 and hence the recovery will be slower than in China and the United States. 

AlixPartners expects China, where lockdowns and restarts took place first, to recover first, to 23 million units this year, followed by the US at 13.6 million. 

Overall, the firm does not see global sales returning to their recent-peak level – that is, circa 94 million units in 2017 – until after 2025.

In releasing the forecast, AlixPartners chairman of Europe, the Middle East and Africa (EMEA), Stefano Aversa, also painted a graphic picture with the statement: “The impact of the COVID-19 crisis globally is as if a market the size of all of Europe had vanished for the year.”