Automotive landscape in Europe/ US and Asia before COVID-19 and post COVID-19

The COVID-19 pandemic has led to an unprecedented impact on the businesses and industrial sectors across the globe. Countries in Asia, Europe and the United States have borne the brunt of the novel coronavirus outbreak due to loss of demand in most domains, including the automobile sector. Though auto experts are hoping for a “V” shaped recovery in the latter half of 2020, the sales figure can be more depressing in April. Let us have a look at the automotive landscape in Europe, the United States, and Asia before COVID-19 and post COVID-19 outbreak.

Automotive Landscape in Europe from Q1 to Q3 (2019)

2019 could not generate much excitement in terms of new car sales in Europe, as most countries reported a decline in their revenue or experienced minimal profit. During the first three quarters (January to September 2019), Germany established itself as the biggest new car market. They reported an overall increase in the passenger vehicle registrations by 2.5%, where the sales figure rose from 2,673,418 units in 2018 to 2,740,158units.

United Kingdom, France, and Italy were the next three countries in terms of the maximum number of new passenger vehicle registrations. However, their revenue was less in comparison to Q1-3/2018. The United Kingdom registered a dip in sales of 2.5%, France by -1.3%, and Italy by -1.6%. The new car registrations in the United Kingdom dropped from 1,910,820 units to 1,862,271 units, in France from 1,662,682 units to 1,641,367 units, and in Italy from 1,491,745 units to 1,467,668 units. The average performance of the European Union (EU) and the European Free Trade Association (EFTA) countries also contracted by 1.6%. Volkswagen and Peugeot Groups was the highest car manufacturer in Europe, and Volkswagen and Renault were the most popular auto brands. They had a market share of 24.4% during this season. Volkswagen Golf was the favourite car model in Q1-3 /2019.

2019 Q4 Statistics in New Car Sales in Europe

The fourth quarter recorded a strong rebound in terms of new car sales in Europe. EU and EFTA countries showed a robust turnaround, thanks to the massive demand for premium and passenger cars. In Q4/2019, the new car registrations increased to 21.4 per cent in these nations. There was 1,261,742 new automobile registration during this period. Netherlands and Sweden registered a surge of as high as 113.9% and 109.3%, respectively in Q4 of 2019. Sales figure increased by 19.5 per cent in Germany, 27.7 per cent in France, and 3.4 per cent in Britain. Massive demand in Q4 helped in registering an overall profit of 1.2 per cent in 2019.

EU and EFTA countries sold more than 15.3 million new cars during the year, making its sixth consecutive annual growth in automobile revenue. 

Automobile Sales in the United States in 2019

The United States showed a bleak status in terms of automobile sales in 2019, as overall revenue declined by 1.4 per cent in comparison to 2018. According to a report by S&P Global Market Intelligence analysis, total vehicle sales in 2019 was 17.0 million units in comparison to 17.2 million units in the previous year. Automobile buyers in the United States showed more interest in SUVs and trucks than passenger cars. Last year, auto manufacturers registered to 4.7 million units sales of cars in contrast to 5.3 million units sales in 2018. However, the sale of trucks, minivans and SUVs rose to 12.2 million units (a profit of 2.8%) against 11.9 million units a year ago. Detroit-based General Motors revenue slumped 2.3% (2.9 million vehicles sale in 2019), while Michigan-based Ford Motors posted a decline of 3% (2.4 million vehicles sale in 2019).

Automobile Sales in Asia in 2019

Automobile markets reflected a gloomy story in most Asian countries in 2019. There was a 3.3 per cent drop in the sales of new vehicles among the six major players in Southeast Asia (Indonesia, Thailand, Malaysia, Philippines, Vietnam, and Singapore) in 2019, where the figure dropped from 3,563,923 in 2018 to 3,445,598. Indonesia emerged as the largest market for new vehicles; however, even their sales declined from 1,151,291 units in 2018 to 1,030,126 units in 2019. Similarly, the revenue of Thailand plummeted from 1,041,739 units to 1,007,552 units, and Singapore from 93862 units to 89160 units.Malaysia, however, registered a growth from 598714 units to 604287 units, Philippines from 401500 units to 408400 units, and Vietnam from 276817 units to 306073 units. 

India too experienced the biggest drop in automobile sales in the last two decades in 2019, thanks to the declining economy and negative buying sentiment among customers. The sales of passenger cars in August 2019 in India plummeted by 31.57% (drop from 287,198 units in August 2018 to 196,524 units). Several big players in the auto industry like Hyundai Motors, Tata Motors, Honda and Toyota also reported a decline in their revenue.Maruti Suzuki, however, registered a growth of 2.5% in 2019, where sales figure rose from 119,804 in 2018 to 122,784. New players like Kia Motors and MG Motor India also fared better during this period.

Automotive Landscape in the United States and Europe during COVID-19

COVID-19 outbreak has impacted automobile sales in most of the affected countries. Revenues from sedans and SUVs plummeted nearly to 50% in the Western European countries in March, outpacing the figures of the United States, where the fall is about 40%. According to LMC Automotive, Italy, France, Britain, and Germany can register a fall of 85%, 72%, 44%, and 38% respectively in March.Most countries have announced business closures and restrictions in the public movement since March, so automobile sales would take time to bounce back. The United States, currently being the epicentre of the pandemic, can experience even more dismal performance in April and May. Though LMC analyst Augusto Amorin has forecasted a yearly sales of light vehicles of 16.5 million, it can come down to 14.2 million units.

Impact of Novel Coronavirus on the Chinese Automotive Industry

Car sales dipped considerably in China during the COVID-19 outbreak. Wuhan city, from where the SARS-CoV-2 virus originated and spread to other cities in the country, is also known as the “motor city” of China. It is home to several auto giants, including General Motors, Honda, Nissan, and Renault. In 2019, Hubei Province was acclaimed at the fourth-largest car manufacturer in the country. About 50% of the total automobile production in China takes place at Wuhan plants. However, during the pandemic, most auto-industries halted their production for more than a month. Even the brand new factory for Tesla in Shanghai closed its doors for a prolonged time. Automobile sale in China fell to as low as 92% during the shutdown. However, the China Passenger Car Association (CPCA) are optimistic that as the nation lifts the lockdown in various provinces, automobile demand will again pick up.

Impact of COVID-19 Pandemic on Indian Automobile Industry

Novel coronavirus outbreak has spelt havoc on automobile sales in India as well. On 24th of March, the prime minister of India announced a nation-wide lockdown for 21 days to arrest the spread of the pandemic. It led to the disruption of operation at several automotive industries. Maruti Suzuki, Mahindra & Mahindra, Hyundai Motor India Ltd and Toyota Motor Corp suspended production in their factories in a bid to safeguard their workforce from the peril of SARS-CoV-2 virus. The biggest carmaker in the country, Maruti Suzuki, experienced a dip of 47% in their sales in March, when they sold only 83,792 units. The revenue of Tata Motors also dipped by 68% in the passenger vehicle segment and by 87% in the commercial vehicle segment.

How will Automotive Industry bounce after the pandemic gets over?

Many auto experts are hopeful that the economy will rebound after countries come out of the lockdown. However, work sectors will transform considerably, and it will have an impact on the automotive industry as well. Detailed below are the expected changes in the automobile domain.

Social Distancing will Increase the Demand for Personal Vehicles

People will become more cautious about their hygiene and safety from SARS-CoV-2 virus and will try to avoid mass transport vehicles until vaccines for COVID-19 hit the market. There will be an increase in demand for two-wheelers and passenger vehicles among the college-goers and office-going population. Students and lower-middle-income groups will place orders for bikes so that they can covey from one place to another without coming in contact with the unknown people. While elite class might continue buying premium vehicles. Moreover, there will be an increase in demand for online delivery for essential commodities, including grocery and medicines. It will also positively impact the sale of two-wheelers due to the surge of deliverymen’s job.

Online Sale of Automobiles

Since brick and mortar shops are not operational during the lockdown period, many OEMs in India are promoting digital sales of automobiles. Hero MotoCorp, TVS and Honda Motorcycle and Scooter India are connecting with e-commerce platforms like Snapdeal and Flipkart for purchase of vehicles through their portal. Tata Motors has also launched an initiative ‘Click to Drive’, where customers can purchase cars from authentic sources without stepping out of their house. This innovative feature connects Tata customers to more than 750 authorised outlets and plans to deliver the vehicle to the buyer’s home after the lockdown gets over.

Sales of Used Cars will Speed-Up

Used cars market will get a much-needed boost as a fallout of the coronavirus. Many customers will find it challenging to purchase brand new cars due to uncertainty in the economy. However, they would like to travel in private vehicles to convey to the office and other crucial places for essential work. Customers will resort to trusted platforms dealing with used cars like www.carandbike.com, carwale etc. for purchasing automobiles.

Prevalence of Remote Working Facilities

Companies will try to reduce their operational cost by promoting work from home cultures among employees. It will sustain the productivity of firms even if they cannot afford to maintain the office space. Moreover, employees will also welcome this move as they can continue working while practising social distancing saving travel time/ risk and money too.

It will also open the gates of new economic opportunities for rural India, companies will shift their base from Metro’s to small towns. Where they will have reduced operational costs, reduced employee cost. This move will foster the growth of rural India and help Govt. to support in make in India mission

Pay-cuts and Layoffs

In a bid to stay afloat during trying times, the management of several automotive companies will hand out pay cut notices to employees to reduce layoffs. Bajaj Auto MD Rajiv Bajaj announced that he would not receive any salary from the company during the lockdown period. Onkar Kanwar, CMD Apollo Tyres and Neeraj Kanwar, vice chairman have also voluntarily decided to go ahead with 25% pay cut in FY21 so that junior employees do not get affected. Anand Mahindra, the chairman of Mahindra & Mahindra, will offer 100% of his salary in the coming few months to set up a fund for helping small businesses and self-employed people tide over the stressful economic condition. However, auto experts believe that, despite these efforts, there will be some layoffs in many automotive companies after the epidemic.This was all about the automotive landscape in Europe, the United States, and Asia before COVID-19 and post COVID-19 outbreak.