Car industry under severe pressure: will Europe be most hurt?
While the Chinese car industry is slowly restarting, the rest of the world is now coming to a halt because of the corona crisis. We already mentioned multiple closings of plants a few days ago. Now, it’s practically the entire ‘western’ industry that is closing down.
The European tendency has crossed the Atlantic now. Big American manufacturers like GM and Ford, but also Tesla, our closing their factories. This spring, the entire car industry has entered an unknown high-risk zone. The problems of 2019 will be peanuts compared to what happens in 2020.
The year already began slowly in Europe, with a market that was 7,4% behind 2019 for the first two months. Some manufacturers, like Opel, Dacia, Jeep, or Honda, already noted a decrease in sales of more than 20%. But March and April will be even far more disastrous. If the market reacts to corona as it did in China, there will be a regress of 80% or more.
-20% in 2020
The German rating agency, Scope Ratings, estimated in an analysis published on Wednesday that the European car market will be shrinking by 20% in 2020. Never seen. From the three biggest markets, China, Europe, North America, the Old Continent will be most hurt, according to Scope Ratings.
To compare, the financial crisis of 2008 provoked an 11% regress of the European market between the beginning of 2008 and the end of 2009. The market diminished the most between September 2008 and June 2009. After that, the financial incentives of the government stimulated sales again.
In comparison, according to Scope Ratings, the Chinese market will regress by 10% and the American market by 9% for this year.
Everywhere, governments are investigating which measures should be taken to absorb this terrible shock. On Wednesday, the French Economy Minister, Bruno Le Maire, had a meeting with Jean-Dominique Senard (President Renault) and Carlos Tavares (CEO PSA).
The Minister has promised he will do everything to help the French car industry (employing 400 000 people), even the ‘unspoken’ of: “If we have to nationalize some of the industrial flagships of the country to save them, we will not hesitate.”
Both big French car manufacturers already have the French state as one of their shareholders. But financially, they are in a very different position right now. Renault is financially far more vulnerable at the moment than PSA. The latter has a much lower industrial break-even point and has cut costs drastically in the last five years.
In the end, the whole industry has to recover as soon as possible. The French suppliers to the car industry are still producing. “Those companies have clients all over the world, also in China, so they have to continue to deliver,” says Marc Mortureux, CEO of the French car platform PFA.
According to the President of PFA, former French Minister, Luc Chatel, there has to be a big recovery plan. “We will have to activate the tools at our disposal (scrapping premium, a premium for electric car purchase…) to reactivate the market.”
“This also means that we have to invest far more in charging infrastructure, a key condition for the real start of a market for electrified vehicles.”