Dramatic drop in European sales predicted for 2020

23 June 2020

23 June 2020

As the European automotive industry faces further challenges in the wake of the coronavirus (COVID-19) pandemic, a leading industry body is predicting a severe slump in registrations.

The European Automobile Manufacturers Association (ACEA) has revised its 2020 forecast down to a 25% drop, which would see around three million fewer cars registered this year compared to 2019. With this forecast, the industry may expect around 9.6 million new cars on the road.

Following the first shockwaves of the crisis between mid-March and May, the EU market has contracted by 41.5% so far this year. This situation is expected to ease to a certain extent in the coming months as lockdown and containment measures are lifted throughout the region.

The forecast represents the lowest number of new cars sold since 2013 when the industry came through six consecutive years of decline following the financial crisis of 2008-2009. However, unlike that period, the industry is being hit twice. First by the forced closure of dealerships due to lockdown measures, and then by the resulting economic crisis as businesses close and workers losing their jobs.

Action needed

In terms of percentages, the predicted 25% decline is the sharpest ever drop witnessed by Europe’s automotive sector, should it occur.

′ACEA maintains hope that this dramatic scenario can be mitigated through fast and strong measures by the EU and national governments,’ stated ACEA director-general, Eric-Mark Huitema.

′Given the unprecedented collapse in sales to date, purchase incentives and scrappage schemes are urgently required right across the EU to create much-needed demand for new cars. In the interest of our industry and the wider EU economy, we are calling for the necessary political and economic support – both on the EU as well as the member state levels – in order to limit the damage to production and employment over the months to come.’

Unknown impact

In January, before the disruption caused by COVID-19, ACEA had forecast a drop of 2% in new-car registrations for the year. The move followed two-years of modest growth in the market, with 2018 seeing a 0.2% increase in registrations, and 2019 seeing a 1.2% rise.

Prior to this, the automotive market had seen strong growth since 2014, with figures up 5.6%, 9.3% (2015), 6.8% (2016) and 3.4% (2017).

However, there were some challenges. The Dieselgate scandal in 2015 rocked the market and led to the collapse of diesel sales in the following years. Carmakers are being pushed to develop electric vehicles (EVs) as a result to keep CO2 levels low and avoid EU-sanctioned fines. Ownership patterns have also changed and mobility services are now an important part of the industry, taking away from sales.

In terms of the pandemic, carmakers are already cutting jobs, and production is slow as social-distancing measures impact vehicle build times. The dramatic drop in sales forecast will do little to inspire the industry for 2020. However, it does offer an opportunity to rebuild. With European countries focusing their incentive schemes on battery-electric vehicles (BEVs), those who have invested heavily in the technology may now see some reward as consumers begin to consider the technology.

The ensuing economic crisis will provoke carmakers to look at their finances, and create ′turnaround’ plans that will see them cut costs and fund developments that will help them through the future. It could be argued, therefore, that the crisis provides a ′reset’ point after years of growth, and amid challenging times.

UK numbers

At the start of the year, ACEA announced it would no longer include UK registrations in its European reporting, meaning the 25% decline it forecasts is restricted to the continent’s mainland markets.

Autovista Group has revised its forecast for the UK market to a 30% decline in 2020. This is a downgrade from the 23% decline forecast in May and 20% forecast in April. In March, before the coronavirus (COVID-19) pandemic took hold, the expectation was that the market would only experience a 3% fall in 2020.