News > After China, the coronavirus is beginning to hit the European automobile industry

After China, the coronavirus is beginning to hit the European automobile industry

 - 18/03/2020

Even though it is impossible to evaluate its impact yet, the crisis related to the novel coronavirus that is now impacting the European automobile industry, after that of China, suggests that a major shock is going to hit the sector.

Registrations of new vehicles dropped by 11% in February in Germany and orders by 19%, according to figures published by car manufacturers last Wednesday. The number one European market is suffering from the initial effects of the Covid-19 epidemic and “it is very likely that we will see further double-digit decreases (…) in the coming months,” indicated Peter Fruss, analyst of the EY audit and consulting firm.
The German institute Ifo also reported on Sunday that the German automobile industry was bracing itself for “difficult times,” following the poor results of its February study.
The situation is no different in Italy and in Lombardy and Venetia, the two main clusters of the epidemic in the country, deliveries of new cars have fallen by around 20%. “Travel difficulties and business activity cutbacks (…) have resulted in a drastic drop in sales of passenger cars,” warned the Italian Federation of Automobile Dealers (Federauto).
In France, there was no noticeable impact on national figures last month. The drop in registrations was only 2.7% although it was noted that new orders fell by 7%.
In the Oise region of France, the first major outbreak area in France, one industry expert, however, anonymously reported that sales “fell” by between 20 and 30% in February.
No one can predict the duration and thus the impact of the Covid-19 epidemic. The French Committee of Automobile Manufacturers (CCFA) has finally decided not to present its forecasts for 2020, initially planned for Tuesday. “We’re waiting until we have a clearer picture of how the epidemic evolves,” indicated the committee’s spokesperson, François Roudier.
The situation was hardly rosy before the coronavirus outbreak. Manufacturers were already predicting a 2% drop in the EU market in 2020, the first in seven years. It will of course be worse.
"Wait and see" 
The epidemic will “of course have an impact as it sparks a “wait and see” attitude,” said Flavien Neuvy, head of the Cetelem automobile watchdog.
Consumers, who are currently stockpiling pasta and flour, are hardly thinking about buying a new car. This was the case in China, where the health crisis started and where vehicle registrations plummeted in February.
“Vehicle purchases, because they aren’t essential and require substantial budgets, are often the first item that consumers cross off their list in times of uncertainty,” explained Flavien Neuvy.
Ferdinand Dudenhöffer, expert at Saint Gall University (CH), forecasts a drop of at least 8% this year in China, the leading international market.
He anticipates a 3% worldwide drop, after declines of -6% last year and -1% in 2018; this represents 7.5 million vehicles less since the 2017 peak in a context of over production. The French manufacturer Renault, among others, has started to raise the issue of plant closures.
The risks related to demand are further compounded by those related to production, with fears concerning shortages of parts that could paralyse European plants following shutdowns in China. Fiat Chrysler has envisaged the question.
For the moment, we have managed to protect our European sites. They are all at full capacity because our European orderbook is full”, reassured Carlos Tavares, CEO of Peugeot-Citroen on Tuesday.
Oliver Zipse, General Manager of BMW, pointed out that the length of the crisis would be decisive: “we are safe for the next three weeks. Afterwards, we’ll have to see.”
"The industry has already been weakened by the trade wars launched by American President Trump; the coronavirus is an added factor at a time when electric vehicle manufacture calls for major investments. A single issue of this nature would be bad news – all three together, well…,” said a worried Dudenhöffer.
Xavier Mosquet, automobile expert of the BCG strategy consulting firm, also forecasts a “morose short-term”, but points to the fact that the industry is solid financially. According to him, “the current crisis is very different to that of 2009, which was deeper and which hit an automobile industry already in poor health, after three to four difficult years.”