Global automobile sales forecast to fall by 20% this year, says S&P

Topics automobile sales | Automobile | S&P

Representative image

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."

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.

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

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.

"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.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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