IHS Markit forecasts new light vehicle sales of 83.4 million globally in 2021, up 9% from a 2020 projection of 76.5 million, as industry demand levels emerge next year in the wake of recovery from the COVID-19 pandemic – especially in major markets. The forecast assumes that effective vaccines will be widely available by mid-2021, although full availability is not expected until sometime in 2022.
Full year 2020 sales are expected to be down 15% from the levels achieved in 2019. IHS Markit remains cautious on recovery prospects, with key markets likely to experience differing demand cycles. Some markets face further fallout from the pandemic, not least due to additional virus-control restrictions for the winter months. On a brighter note, for an industry that had traditionally been dependent upon in-person showroom traffic since its inception, online sales and contactless delivery programs have been swiftly rolled out and are helping to offset the impact of restrictions on registrations.
“Global 2021 auto recovery prospects very much depend on the path of the pandemic, especially whether governments can deliver on vaccine programs. Many parts of the world face a winter of stubbornly high COVID-19 infection rates and ongoing restrictions, which could further dent demand prospects. The hope is that demand begins to normalize from mid-year 2021,” said Colin Couchman, executive director, global light vehicle forecasting, IHS Markit.
Regional sales outlooks influenced by virus resurgences, restrictions, and economic support
European recovery prospects are mixed, with worrying virus resurgences and ongoing restrictions, varied economic support, the Brexit negotiations and fears for a post-holiday third wave of the virus. Total Western and Central European automotive sales estimates for 2020 are set at 13.7 million units, down 24.2% (y/y), according to IHS Markit. Government auto stimulus programs from mid-2020 continue to help, especially for the four major European markets. The cautious December roll-out of the vaccine in the UK provides some hope in the gloomy mid-winter ahead of the new year, with demand growth set at 11% y/y, to 15.3 million units for 2021, although Brexit risks remain.
“European car consumers are firmly in full “wait-and-see” mode to see how COVID-19, EVs and Brexit pan out,” said Couchman.
The sequential rise in U.S. auto demand levels from the April 2020 trough reflects that consumers that were willing, ready and able to purchase a new vehicle did so. While the pace of growth for auto sales flattened out after September, IHS Markit expects continued growth in auto demand levels in 2021, supported by sustained economic development from better-than-expected news on vaccines and likely economic stimulus.
“Looking at 2021, US sales volumes are expected to reach 16 million units, up an estimated 10% from the projected 2020 level of approximately 14.5 million units. The pace of sales is anticipated to be stronger in the second half of the year, following the expected widespread availability of the vaccine by summer,” according to Chris Hopson, principal automotive analyst at IHS Markit.
Shades of “first in, first out” for Mainland China, as effective pandemic containment has enabled an ongoing auto demand recovery, with 2020 set to deliver 23.6 million units, down by just 5% y/y. Bright spots include premium demand and the light commercial vehicle (LCV) sector. Government support includes revised new-energy vehicle (NEV) rules, a six-month delay to the China 6 emissions deadline, city derestrictions, license plate quota increases, and revised lending rules. In 2021, IHS Markit expects the market in China to recover further to 24.9 million units (up 5.6% y/y).
Production expected to rebound in 2021
Global light vehicle production in 2020 is expected to finish at 74.1 million units, a 17% decline over 2019 levels. For 2021, IHS Markit forecasts a rebound in light vehicle production of 14 percent, to 84.3 million units, based on current analysis. This reflects continued recoveries, particularly in the major markets of China, Europe and North America. Manufacturing operations in most regions are largely restored and while COVID-19 secure practices will affect technical capacity, in most cases there is enough to support recovery.
In China, manufacturing activity is reaching pre-COVID levels, and IHS Markit forecasts 2021 output to rise 5.6% over 2020 and surpass 2019’s admittedly weakened levels. Threats to the supply chain remain, but to date these have been successfully navigated since the restart in March.
For North America, the recovery profile continues but there are some unique challenges. In the short term as 2020 concludes, there is concern over potential supply disruption as a direct result of COVID-19 absenteeism and IHS Markit has a cautious view of Q1 in light of this. The balance of the year is expected to show production increase 29% (y/y) in the US, boosted by efforts to close the inventory gap that opened up back in Q2 2020 when manufacturing was off-line. With demand levels expected to remain healthy, this effect is forecast to run across the next 12 months.
Europe is expected recover in 2021, gaining 15% (y/y), but it is a fragile road with more obvious risk to the outlook than China or North America. Having navigated a series of second-wave lockdowns in November, more stringent measures are now being adopted in Germany and much of the United Kingdom. At present, this is not posing a direct risk to manufacturing.
“Additionally, the Brexit transition has still not been resolved,” said Mark Fulthorpe, executive director, light vehicle production forecasts at IHS Markit. “A ‘no-deal’ outcome would dramatically disrupt sales and production levels. Initially the hit to sales would be felt hardest in the UK market, while production facilities in Germany, Spain and Czech Republic supplying the UK market would be most exposed to this decline.”
In addition to the risks posed by the pandemic and failure to strike a trade deal after the Brexit transition period, the region also faces the introduction of a new corporate fleet average for CO2 emissions and balancing the vehicle mix is likely to be a constraint.
Electrification remains a growing dynamic
In the European market, battery electric vehicle (BEV) sales have been significantly boosted by regulatory requirements, despite the COVID-19 impacts. The 95 g/km passenger car CO2 target has been phased in during 2020 and will be fully implemented in 2021. BEV sales share in October 2020 climbed to nearly 7% and is moving aggressively in the last quarter of 2020 as well, aiding all major car manufacturers in minimizing potential gap-to-compliance.
“Excess premiums for 2020 are expected to reach 1.04 billion Euro with a market wide CO2 target miss of 2g,” according to Vijay Subramanian, IHS Markit CO2 compliance director, automotive. “Under the Green Deal framework, the 2030 passenger car CO2 target is expected to get more stringent compared with the current legislative requirement of 37.5% CO2 reduction from 2021 levels.”
China remains a leading market for electrification with its “dual-credit” policy. The 4 L/100km 2025 CAFC Phase-5 target with updated new energy vehicle (NEV) requirements starting from 2021 will be the key driver to further intensify electrification development in the region.
“However, current IHS Markit forecasts predict BEV share of nearly 14.6%, representing nearly 3.2 million passenger vehicles in China by 2025 – which will still leave a significant gap and more than 10 million CAFC credit deficits,” said Subramanian.
On the other hand, in the U.S., the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule was finalized at the end of April this year.
“As a result, relaxation of standards is expected to provide some headwinds to the wave of new BEV vehicles being introduced to the market. However, with the incoming Biden administration, the possibility of the U.S. rejoining Paris Agreement and California waiver being reinstated may well incentivize BEVs in the U.S. market sooner rather than later,” according to Xi Wang, IHS Markit powertrain analyst.
In total, passenger car BEV volumes across China, Europe and the U.S. are expected to reach 2.45 million in 2021, or about 5.4%, according to IHS Markit forecasts, representing an increase of 1.7% over 2020.