The novel coronavirus (COVID-19) pandemic has shaken Europe’s automotive industry to its core, with a combination of travel bans, factory shutdowns and limited consumer spending power spelling disaster for the new vehicle market.
The European Automobile Manufacturers’ Association (ACEA) currently forecasts a 25% drop in passenger car registrations in the European Union, falling from 12.8 million last year to just 9.6 million units in 2020. Recent figures from Germany’s federal motor transport authority revealed that new car registrations in the country had fallen 61% in April, and 50% in May.
In Italy, Fiat Chrysler Automobiles (FCA) anticipates car sales will slide 35% by the end of the year, with sales reportedly close to zero for the months of March and April. A government bailout further illustrates the seriousness of the issue, with the automaker securing a state-backed loan of €6.3bn (US$7.1bn). In France, the government has agreed to a €5bn loan to Renault—an automaker in which it holds a 15% stake.
Production volumes in the sector remain far from sustainable, and the lack of demand presents a real challenge
It is not only the automaker community that is feeling the bite; the vast network of suppliers is also under the pump. So says Sigrid de Vries, Secretary General at the European Association of Automotive Suppliers (CLEPA). “Production volumes in the sector remain far from sustainable, and the lack of demand presents a real challenge,” she explained in a new Automotive World report, which looks at the prospects for the light vehicle (LV) and heavy commercial vehicle (HV) sectors in Europe in the period 2020 to 2024.
The pandemic has also tempered Europe’s ambitions for autonomous driving, with reports of various programmes being pushed back to ensure funds are directed toward critical operations. BMW’s announcement that €30bn would be invested in electric and autonomous technology by 2025 would seem to have been announced at an unfortunate time: a national lockdown in Germany was enforced just days later. Recently announced partnerships between Mercedes-Benz and Nvidia, as well as Volvo and Waymo, would indicate that long-term targets for automation remain a long-term priority.
Shared mobility may also face a greater struggle than ever to find teeth; many travellers will be increasingly wary of mixing with others, and those who would once have shared a bus or train may return to private vehicle use. Ride-hailing is expected to decline at the benefit of car-sharing, where users can pay by the minute, day or week for access to a vehicle. The resurgence of cycling and continued adoption of e-scooters would indicate a relatively fast recovery for the micromobility sector.
The period to 2024 will likely bring a renewed effort to commercialise both plug-in electric vehicles and hydrogen fuel cell vehicles
For European automakers, priorities are likely to turn toward powertrain electrification for the time being. Looming emissions targets mean that new vehicles sold in Europe must continue to become cleaner or face steep penalties—a hit that must surely be avoided as these companies pursue financial recovery. The European Commission’s 95g CO2/km fleet average target is already being phased in, with full compliance from 2021. Fines of €95 for each gram per kilometre exceeded await those that do not hit the mark.
The period to 2024 will likely bring a renewed effort to commercialise both plug-in electric vehicles and hydrogen fuel cell vehicles. New plug-in models are set to flood the European market, with manufacturers such as Kia, PSA and Volkswagen offering much-needed variety for consumers. In the commercial vehicle space, Nikola now has a much-needed European partner in Iveco, while Hyundai plans to sell 1,600 fuel cell trucks on the Continent by 2025. Effort must be made to bulk out and establish public recharging points and hydrogen refuelling stations respectively.
But investing in electrification at this time may come as a challenge until vehicle sales rebound in general. In Germany, a stimulus package for plug-in vehicles has been criticised by many industry stakeholders for providing little support for diesel and gasoline car sales, from which automakers and suppliers see most of their revenue. As of May 2020, conventional internal combustion engine (ICE) cars accounted for more than 82% of new cars sold in the European Union.