Europe's mass of unsold cars to temper auto supply chain rebound

Covestro AG, a maker of plastics used in car interiors, said a glut of unsold vehicles in Europe will temper a recovery in the automotive industry’s supply chain.

While the world’s largest maker of polycarbonate expects sales to pick up slightly in the region during the remainder of the year, the auto industry is dealing with bloated inventory of vehicles sitting at dealerships and factory lots, Chief Executive Officer Markus Steilemann said Thursday on Bloomberg Television.

“There is a big pile of cars and the recovery will take longer, but there’s stimulus in other areas," Chief Financial Officer Thomas Toepfer said in an interview. “We see a clear recovery path since mid May that’s continued into the third quarter."

Covestro is betting that the stronger rebound in China, demand for electric vehicles and a move into medical-gear markets will spur sales in the coming months. Toepfer said July has been an improvement on the prior month so far.

“In China, what we sold into the industry is real demand," Steilemann said. “In the US, we have a mixed picture."