Sales recovering but outlook still grim – the week | Automotive Industry Comment

The worlds light vehicle market is forecast by just-auto parent company GlobalData to decline by 17.2% to 73.6m units in 2020, due to the impact of the COVID-19 pandemic and its associated economic fallout

The world’s light vehicle market is forecast by just-auto parent company GlobalData to decline by 17.2% to 73.6m units in 2020, due to the impact of the COVID-19 pandemic and its associated economic fallout

Unsurprisingly, the COVID-19 pandemic, which is showing troubling signs of a resurgence in many countries following the relaxing of lockdown restrictions, continues to affect new vehicle sales. Case in point – the US where many states and regions have recently reimposed stricter lockdown rules again after a resurgence of new infections. Our own analysis showed the year over year deficit in US light vehicle sales widened in the second quarter of 2020 as the COVID-19 pandemic ruled all three months. Jaguar Land Rover and Mercedes had not yet released their Q2 figures but preliminary totals indicated Q2 deliveries came to about 2.9m, a 33.8% tumble from the same period in 2019. The average daily sales rate (DSR) fell 18.9% from Q1 to Q2 as quarantines and other restrictions slashed showroom traffic in the US.

West European new car registrations fell by 24.8% year-on-year (YoY) in June, according to data released this week, as the market was again hit by fallout from the COVID-19 pandemic. While the region’s annualised selling rate stood at just 10.3m units a year, it was an improvement on April and May’s numbers. Analysts have cautioned, though, it is ‘clear that demand remains very depressed and COVID-19 continues to weigh heavily on the regional economy’. French new car registrations were a high point for the region last month, with a 1.2% YoY increase in sales, while other markets were again down YoY.

In that context, you won’t have been surprised to read the world’s light vehicle market was forecast by GlobalData, the data and analytics company and parent of just-auto, to decline by 17.2% to 73.6m units in 2020, due to the impact of the COVID-19 pandemic and its associated economic fallout. “This is a bigger one-off shock than witnessed in the two years of the global financial crisis,” said automotive analyst Calum MacRae. GlobalData’s analysis suggested the damage to the global market would turn out to have been most acute in the second quarter of this year, when strict lockdown measures were in place worldwide. Just in the last two weeks, about 30,000 job losses have been announced here in the UK alone as autos (contract logistics workers at Jaguar Land Rover), aviation, retail and other sectors contract and shed workers as the effects of the pandemic are analysed and adjusted for. “Our forecast sees Q2 around 34% down on last year’s pace and way below the 2008 Q4 low point reached during the last big global downturn,” MacRae said.

Just as business closed in Europe late last Friday, Daimler’s Mercedes-Benz Cars unit sprang a surprise, but not entirely unexpected announcement: it would start talks to sell its Smart car plant in Hambach, France, “with the aim of giving the location the best possible future prospects”. As it focused on electrification of its product range, as well as the digitalisation of vehicles and company processes, it was taking steps to improve its cost structure and become more efficient with “adjustment and realignment of capacity” within the global production network. Against this backdrop, the assembly plant in Hambach, France, had become surplus to needs. Ola Kaellenius, chairman of Daimler AG and Mercedes-Benz AG, said: “The effects of the COVID 19 pandemic on the economy are creating new framework conditions in the market and in this context we are optimising our global production network. That is why we intend to start talks on the sale of the Hambach plant.” With the next generation of Smart models, now EV only, to be produced in China, Hambach always was going to be surplus to Daimler requirements but any hope the workers there might have had the plant perhaps would be repurposed to build Mercedes had been dashed.

Next, this week, came another surprising turn of events as Ineos Automotive – which is planning to launch a new 4×4 utility vehicle called ‘Grenadier’ in 2022 – confirmed it was in talks with Daimler over the possible acquisition of the Hambach plant. It has suspended post-lockdown work at its under-construction sites in Portugal and the UK while it ‘reviews options’ over the next few weeks. As we noted in our report: “Although nothing is finally decided yet, the news will be a potentially big blow to the Welsh economy and especially to the Bridgend area that is also losing a Ford engine factory that is set to close at the end of this year.”

Our new and future products editor was quick to update his just-published analysis Daimler future models – Mercedes EQ taking into account the proposed Hambach sale. “In February Daimler told us that the EQA would become available “before the year is out”, issuing images of a camouflage blue prototype being tested in Sweden. COVID-19 was thought to have delayed this until perhaps November or December but now the model will likely not arrive until 2021. This would have been the first vehicle for the brand to be manufactured in France and indeed it might still be. The closure of Smartville might not take place until 2022 so as to give Daimler time to shift build of the EQA to perhaps Rastatt.” The rest is well worth a read.

So is our latest look at future BMW cars. “The company which forged its reputation long ago with the first generation 3 Series shows no sign of phasing out cars. BMW knows that sedans reinvented for the 2020s is what customers want in China and Europe. And even though buyers in North America prefer a bias towards SUVs, last year BMW USA’s cars still outsold its light trucks.”

Speaking of new products, our resident guru has been pedalling the latest Volkswagen Golf 8 (I recall the launch of the first one, specified for my local market with a puny 1100 engine and unassisted drum brakes all round to try and keep the Deutschmark-inflated price as low as possible against yen-priced Japanese competition) and noted: “Far from outdated even now, will we remember the seventh generation with fondness as the last ‘analogue’ Golf? Due to some digital gremlins and then COVID-19 wreaking havoc with the production ramp-up, the successor got off to a bumpy start. By year end though, the new Golf 8 could be Europe’s best selling vehicle.” Sure makes my own Golf 4-based ’99 Bora look antique.

I noted earlier the announcement two in five workers employed by DHL on a JLR logistics contract face redundancy, across full time, salaried and agency staff. A smaller number of Ford Romania ‘temps’ face a similar situation, also due to COVID-19, despite their factory turning out the well received new Puma compact crossover alongside the well established EcoSport B-SUV. Some 213 temporary workers at the factory in Craiova will lose their jobs as the company faces weak demand, local reports said. The 213 employees account for one-third of the temporary workers at the plant which employs 6,300 of which 670 are temps. Some 1,800 are still under ‘technical unemployment’ or furlough. A Ford spokesman said: “Our company continually reviews employment needs based on market demand and the efficiency of the production process. Considering the current situation of the industry in which we operate, we confirm that some of the individual fixed term employment contracts at the factory in Craiova will not be extended.” To top it off, I read today, the virus is resurging in parts of Romania and some previously relaxed lockdown restrictions are being reimposed.

A new interview published this week: Tenneco is supplying thermal and acoustic management solutions in an exhaust system design for first-ever, mid-engine Chevrolet Corvette so, to get a better understanding of the whys and wherefores, we spoke to Dmitri Konson, VP global engineering at Tenneco Clean Air.

Finally, our well received series on vehicle interior technology continued this week with scrutiny of Volvo Cars’ S60 Polestar Engineered. It looks like any other workaday variant, yet the posh adjustable dampers set it apart, amongst other things. As the name suggests, its chassis has been engineered by Polestar, Volvo’s performance arm. But what of its interior? Read on.

Have a nice weekend.

Graeme Roberts, Deputy Editor, just-auto.com