European car sales forecast to drop by record 25% due to Covid-19

European car sales are forecast to drop by a record 25% this year after the coronavirus pandemic shuttered factories and showrooms, leading to a collapse in demand.

Sales in the European Union are expected to fall to 9.6 million vehicles, from 12.8 million last year, the European Automobile Manufacturers Association said Tuesday in its first forecast since January, before Covid-19 hit the region.

That’s the lowest number of cars sold in seven years, when the industry was emerging from a years-long decline after the 2008 financial crisis, and the steepest percentage drop ever.

The exact shape of a potential recovery remains unclear as carmakers from Volkswagen AG to Fiat Chrysler Automobiles NV prepare to announce results for what likely will be a devastating second quarter. In the US, Ford Motor Co. forecast a $5 billion loss for the three months through June.

“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," ACEA Director General Eric-Mark Huitema said in an emailed statement.

The EU market has contracted 41.5% so far this year, ACEA said. It expects sales to slightly recover in the coming months as lockdowns end and life slowly returns to normal.

While new auto registrations across the region fell 57% year-over-year last month, it was an improvement from an even steeper plunge in April.