Even if its impact is still impossible to assess, the crisis linked to the new coronavirus is starting to spread to the automotive activity in Europe, after China. Its propagation suggests a shock of great amplitude for the sector.
New car registrations fell 11% in February in Germany, and orders down 19%, according to manufacturers’ figures released on Wednesday. The first European market is experiencing the first effects of the Covid-19 epidemic and “it is very likely that we will still see a double-digit decline (…) in the coming months”, commented Peter Fuss, analyst from the EY audit and consultancy firm.
The German automobile industry is preparing for “difficult times”, the German institute Ifo had already warned on Sunday, after indicators at half mast in its February survey.
The same trend in Italy, where Lombardy and Veneto, the two main centers of the disease in the country, saw new car deliveries drop by around 20%. “Travel difficulties and restrictions imposed on business activity (…) have led to a drastic reduction in sales to individuals,” worried the Italian Federation of Car Dealers (Federauto).
In France, the impact on national data was not yet visible last month. The drop in registrations was limited to 2.7%, although new orders fell 7%.
But in the Oise, the main focus of the Hexagon epidemic, a professional in the sector, on condition of anonymity, reported to AFP a “dropout” in sales “between -20% and – 30% in February “.
For the moment, it is impossible to predict the duration and therefore the impact of the Covid-19 epidemic. The Committee of French Automobile Manufacturers (CCFA), which was to present its 2020 forecasts on Tuesday, has finally given up. “We are waiting to see how the disease will evolve,” said communications director François Roudier.
The economy was bad even before the coronavirus. Manufacturers expected a 2% drop in the EU market in 2020 in January, the first in seven years. It should be worse.
“Wait and see”
It is “certain” that the epidemic “will have an impact because it generates a wait-and-see attitude,” warns Flavien Neuvy, director of the Cetelem automobile observatory.
Consumers who rush to packets of pasta or flour to build up precautionary stocks do not think of investing in a new vehicle. We saw this in China, the starting point of the health crisis, where registrations collapsed in February.
“Because they are not vital and represent large budgets, car purchases are often the first to be abandoned by consumers in times of uncertainty,” says Neuvy.
Ferdinand Dudenhöffer, expert from the University of St. Gallen (Switzerland), predicts a fall of at least 8% this year in China, the world’s largest market.
He anticipates a 3% drop in the world market, after -6% last year and -1% in 2018, or 7.5 million vehicles lost since the peak of 2017, in a context of overcapacity in production. The French manufacturer Renault, among others, spoke of possible plant closings.
In addition to demand-side risks, there are production risks, with fears of a shortage of parts which could paralyze European factories after interruptions in China. Fiat Chrysler considered it.
“For now, we have managed to protect our European sites. They are running at full speed because our order book in Europe is excellent,” reassured PSA (Peugeot, Citroën) boss Carlos Tavares on Tuesday.
Oliver Zipse, managing director of BMW, underlines that the duration of the crisis will be decisive: “we are secure for the next three weeks. After, we will have to see”.
“The industry was weakened by the trade wars of US President Trump; now the coronavirus is added at a time when the electrification of vehicles requires large investments. Only one of these problems would hurt very much. We have all three simultaneously”, worries Mr. Dudenhöffer.
Xavier Mosquet, automobile expert of the BCG strategy consulting firm, also foresees “a gloomy economic situation in the short term”, but with rather solid groups financially. According to him, “it is very different from the 2009 crisis, which was deeper and which the car groups had addressed in poor health when they were already coming out of three to four very difficult years”.
ats, awp, afp
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