Even as a number of global car makers have issued warnings of profit for the current year being hit because of the coronavirus outbreak in China and elsewhere, its global vehicle sales forecast for the current year has also been reduced by Moody’s Investor Service because of a predicted reduction in demand as well as massive disruptions in supply chains of auto companies that have impacted production even in plants outside of China.
According to the latest forecast of the global auto sales, the firm now expects that there will be a drop of 2.5 per cent in the global auto sales for the current year compared to its previous estimates of a reduction of sale of just 0.9 per cent for the same period.
According to Moody’s, the factors that will be responsible for the overall decline in vehicle sales throughout the world for the current year from 90.3 million to 88 million include the disruptions caused by the coronavirus as well as stricter emissions regulations in many markets of the world.
“Cautious consumers are steering clear of crowded areas, including auto dealerships, while corporate demand for vehicles is weakening as broader economic uncertainties cause companies to scale back capital spending,” Moody’s said in a report on Wednesday related to China.
According to the breakup of the forecast for the decline of sales, the firm predicted that there would be a 2.9 per cent drop in sale in China, a 4 per cent fall in Western Europe while the United States is likely to see a drop in sale of 1.2 per cent. This new forecast by Moody’s also assumes that countries – including China, will be able to contain the virus outbreak by the end of the first quarter of the current year. According to Moody’s, such containment of the outbreak will allow “the resumption of normal economic activity in second quarter.”
Moody’s also said that its outlook for the global automotive industry “remains negative”, while the firm predicted that the growth rate for the global economy for 2020 will be at 2.4 per cent. According to the firm, there was a drop of 4.6 per cent in global vehicle sales in 2019.
If the firm expected that any changes would allow the sales of the light vehicles globally to recover to at least 1 per cent in the next 12 to 18 months, the firm would consider returning its outlook for the global auto industry to stable statues, Moody’s said. That growth in the light vehicles sale will have to be in addition to the auto industry also simultaneously improving on its pricing and “at least stable capacity utilization.”
(Adapted from CNBC.com)