Given the widespread lockdowns and rising unemployment levels around the world, consumers are opting to stay home and decrease their non-essential purchases to a minimum. It is no wonder that the European Auto Industry Association (ACEA) has reported that new vehicle registrations have dropped by 51.8% year-over-year, with much the same numbers predicted for the month of April.
Clearly, demand for new vehicles has drastically decreased across Europe, with no predictions of a forthcoming turnaround in the near future. However, irregardless of consumer demand numbers, major European automakers are beginning to reopen factories to get a head-start on manufacturing vehicles that as of current- do not have buyers.
According to the ACEA, the month of March saw 853,077 fewer new vehicles on the road, which translates to an approximate 51.8% drop year-over-year, which is thus far the largest decrease on record. In further detail, Germany’s new car registrations decreased by 37.2%, France’s fell by 69.3%, and Italy, which was hit the hardest from the pandemic, had a drop of a staggering 85.4% in new car registrations.
Analysts are predicting the month of April is not going to be any better, given that half of the world is still under some form of economic lockdown with no end of COVID-19 in sight. Despite all of that however, some major auto manufacturers are getting impatient, and have begun reopening plants across Europe. Beginning April 20, Volkswagen will resume production at its factory in Zwichau, Germany, and Bratislava, Slovakia. Then the following week, more factories will begin easing into production including those in Portugal, Russia, the US, and Spain.
Toyota is following much the same path and easing into reopening its factories as well. The car manufacturer will resume production on April 22, but is promising to take extra measures to keep its workers safe and reduce the risk of infection. Hyundai has already resumed production at its Czech Republic plant as of April 13, but reduced the number of shifts from three to two. Ferrari however, is not planning on resuming production until at least May 3.
Although many automakers are eagerly reopening factories, the supply of cars and the demand for cars is most likely not going to be in equilibrium for awhile. With respect to the current economic situation as a result of the coronavirus pandemic, many consumers have been laid off, and are thus the recipients of some form of a cash stimulus. However, that stimulus check is going towards necessities such as groceries and shelter, rather than a down payment on a new car- much to the dismay of automakers. As such, there will have to be some persuasive incentives initiated to get the soon-to-be oversupply of vehicles under control.
Information for this briefing was found via European Auto Industry Association, European Automobile Manufacturers Association, Bloomberg, and RT News. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
