European car sales are forecast to drop by a record 25% this year after the coronavirus pandemic shuttered showrooms, leading to a collapse in demand and threatening one of the region’s biggest industries.
Just 9.6 million vehicles are expected to be sold in the EU, compared with 12.8 million last year, the European Automobile Manufacturers Association said in its first forecast since January, before the health crisis unfolded in the region.
That’s the steepest percentage drop on record and the lowest number of cars sold since 2013, when the industry was just emerging from a protracted decline following the 2008 financial crisis.
The forecast follows recent Irish figures from the Society of the Irish Motor Industry – or SIMI – showing a 72.3% year-on-year decline in new car registrations in May.
Irish car showrooms closed up to May 18 and registrations in the year to the end of last month were down by 34.6% - or almost 52,000 cars – year-on-year.
SIMI boss Brian Cooke warned that strong government support would be vital in supporting the 50,000 people employed in the Irish motor industry in the years ahead.
The exact shape of a potential recovery in Europe's motor industry remains unclear as carmakers from Volkswagen to Fiat-Chrysler prepare to announce results next month for what is likely to be a devastating second quarter.
France, Germany and Spain have unveiled aid packages for the industry, while Britain’s main motor trade group called for government support, saying one in six jobs are at risk.
The UK's Society of Motor Manufacturers and Traders (SMMT) has called on the British government to introduce measures such as emergency funding, tax holidays and policies to boost sales, saying it sees UK production dropping by a third to 920,000 cars and light commercial vehicles this year.
The SMMT also reiterated its call for Britain to negotiate a tariff-free trade deal with the EU, saying annual output could otherwise fall to less than 850,000 cars by 2025, the lowest since 1953.
“Covid has consumed every inch of capability and capacity and the industry has not the resource, the time nor the clarity to prepare for a further shock of a hard Brexit,” SMMT CEO Mike Hawes said.
“Brexit is still the biggest threat to the long-term future of the industry, that’s why we do need a deal," he said.
“Given the unprecedented collapse in sales to date, purchase incentives and scrappage schemes are urgently required right across the EU to create much-needed demand for new cars,” Eric-Mark Huitema, director-general of the European group known as ACEA said.
Some 11% of the region’s manufacturing jobs are in the motor sector.
The EU market has contracted 41.5% so far this year, according to ACEA, which expects sales to recover slightly in the coming months as lockdown measures end and life slowly returns to normal.
While new car registrations across the region fell 57% year-over-year last month, it was an improvement from an even steeper plunge in April.
Meanwhile, a PSA Group shareholder is calling for the French carmaker to change the terms of its merger with Fiat-Chrysler to reflect the downturn in the global motor industry and the Italian-American manufacturer’s declining prospects.
Six months after striking a deal to combine, the two companies’ fortunes have diverged, Paris-based Phitrust said ahead of Peugeot-maker PSA’s annual meeting on Thursday and Fiat’s the following day.
PSA’s strong balance sheet and cost cutting have helped it weather the slump, while Fiat Chrysler’s finances appear increasingly fragile, Phitrust said.
“PSA didn’t burn through cash since the start of the year the way FCA did,” Olivier de Guerre, head of Phitrust, said.
He added the combined company also faces complications from an expected post-merger restructuring in Europe.
In a joint statement last week the car groups said preparations for the merger are advancing as planned.
-Bloomberg and Irish Examiner