Europe can expect a slow, u-shaped recovery from COVID-19 pandemic

10 July 2020

Many of Europe’s key automotive markets are expecting a slow, u-shaped recovery in the wake of the coronavirus (COVID-19) pandemic, with residual values (RVs) not expected to recover within two years in most markets.

As lockdowns ease and dealerships open, the industry is now focused on the future and what steps it needs to take to adapt to drive business in the new economic climate. Economic forecasts have not bottomed out and current views are that global GDP could drop by around 5% this year, the Eurozone by around 8%, and some markets more than that. Most European markets are expecting recovery period to go beyond 2021.

Expert analysis

Autovista Group’s European research and analysis was discussed in a recent web seminar on the economic impact of the pandemic on Europe’s used-car markets and RVs.

Seven of the company’s top experts came together in an online discussion chaired by Autovista Group Daily Brief editor Phil Curry, discussing how markets are reacting to the COVID-19 downturn and the scenarios that some countries may find themselves in. You can watch the entire seminar broadcast below.

The audience consensus in a poll conducted during the seminar was in line with Autovista Group’s predictions that Europe will see a slow, u-shaped recovery, with most markets falling into this pattern.

Over half (55%) of those responding suggested a slow, u-shaped recovery. Around a quarter (27%) believed a moderately quick, v-shaped recovery was most likely, while 14% felt a deep recession with a slow recovery was on the cards.

Quoting data from the latest update of Autovista Group’s whitepaper on how COVID-19 has impacted the industry, Dr Christof Engelskirchen, chief economist at Autovista Group, suggested that in many European markets, RVs will not fully recover for the next two-and-a-half years.

Regional outlooks

Autovista experts from around Europe discussed the pandemic’s economic impact in their respective markets and what outlook scenarios were emerging. Ana Azofra, valuations and insights manager at Eurotax Spain, noted her country and Southern Europe had been badly affected by the pandemic with a very restrictive lockdown.

′Given the gloomier outlooks over the past months for Spain and southern Europe, we find the ′medium risk, slow u-shaped recovery’ scenario the most likely,’ she commented. ′But we have also increased the probability of falling into a more negative scenario.’

Idesbald Vannieuwenhuyze, executive chief editor and valuation manager at Autovista Benelux, said that 33% of employees in Belgium do not want to be office-based following the pandemic outbreak, with a mini-boom in used-car sales expected to help the market. Nico VanHalst, RV manager for the Netherlands, pointed out that online sales and home delivery is booming in the country, which did not go down the path of a complete lockdown. The Netherlands has also introduced an incentives scheme that sees a €4,000 grant for new vehicles and €2,000 for used models.

Andreas Geilenbruegge, head of valuations and insights at Schwacke, highlighted some risks to RVs in Germany that are on the horizon, including the incentive programmes for battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs), together with a temporary VAT reduction, which will increase pressure on RVs. Germany predicts a 2.5% drop in RVs for 2020.

Poland is seeing unexpected high demand for new passenger cars, meaning supply will be a bigger problem for the country, explained Marcin Kardas, editorial team manager at Autovista Poland. There is also growing interest in used cars, leading to a short-term impact on RVs in the country.

The picture from the UK is more complicated with the added backdrop of Brexit. Anthony Machin, head of content  and  product at Glass’s Information Services, said that the country’s new-car market is forecast to decline by 30% this year, with a 65% likelihood that the UK will experience a medium-high risk, deep recession with a slow recovery. He also emphasised that with the UK leaving the EU at the end of 2020, there is still no firm indication what the trading relationship with Europe will look like beyond the end of this year.

With various parameters for different scenarios taken into account, including a potential second wave of infections, continuing fluctuations in GDP, supply issues and country-specific factors, the landscape for scenarios in all countries is continuously changing. Autovista Group experts continue to monitor developments, and will update their expectations accordingly.

You can find all information presented in the Autovista Group web seminar here, with further details in the whitepaper: How will COVID-19 shape used-car markets?