Global auto sales forecast to fall by 20% this year: S&P

Many automakers' and suppliers' plants are likely to operate at sub-optimal capacity and at less efficient levels for the remainder of 2020.
By : ANI
| Updated on: 18 Sep 2020, 01:13 PM
Newly manufactured cars are seen at a port in Dalian, Liaoning province, China. (File photo) (REUTERS)
Newly manufactured cars are seen at a port in Dalian, Liaoning province, China. (File photo) (REUTERS)
Newly manufactured cars are seen at a port in Dalian, Liaoning province, China. (File photo) (REUTERS)
Newly manufactured cars are seen at a port in Dalian, Liaoning province, China. (File photo)

Global light vehicles sales are expected to fall by 20 per cent this year compared with 2019 following sales and production disruption due to the Covid-19 pandemic, S&P Global Ratings in a report published on Friday.

"This new forecast follows a first-half 2020 sales slump of 25 per cent, an unprecedented shock for the global industry," said S&P Global Ratings analyst Vittoria Ferraris.

"We project global vehicle sales to expand 7 to 9 per cent both in 2021 and 2022, meaning that light vehicle sales two years from now will still be 6 per cent below 2019 volumes."

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(Also read: Europe's car sales fall 18% in August, dashing hopes for a comeback)

Any upside to our sales scenario will stem mainly from the Chinese market, the most dynamic but least predictable among the main global auto markets, said Ferraris adding that China may be the only market to catch up with 2019 volumes by the end of 2022.

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S&P said its global auto sales forecast is more conservative than general market standards.

File photo used for representational purpose only
File photo used for representational purpose only (REUTERS)
File photo used for representational purpose only
File photo used for representational purpose only (REUTERS)

But it deems it consistent with the pandemic-related dramatic squeeze on potential car-buyers' finances across the globe combined with pressure on affordability stemming from higher prices of new hybrid and electric vehicles that carmakers are trying to promote in Europe and China.

Many automakers' and suppliers' plants are likely to operate at sub-optimal capacity and at less efficient levels for the remainder of 2020. A large proportion of rated issuers will end 2020 with a higher debt load than at the start of the year.

(Also read: Angela Merkel's allies call for govt aid to help struggling German auto industry)

"We, therefore, expect companies' profitability and cash flow adequacy metrics to be weaker in 2021 than in 2019," said S&P.

"This combined with the enduring profitability pressure generated by the transition to electric mobility (unimpeded by Covid-19) and the sizable investments needed to upgrade existing and develop future technology leads us to maintain a negative outlook for the auto industry despite some evidence of recovery."

First Published Date: 18 Sep 2020, 01:13 PM IST
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