Truck market downturn and weak car demand make for a tough 2020

2020 will challenge vehicle manufacturers, with a cyclical truck industry downturn barely offset by minimal growth in global light vehicle sales. By Martin Kahl

Having ended the 2000s with a worldwide financial crisis and the collapse of global car sales, the 2010s on the whole turned out well for the automotive industry, and sales of all vehicle types surged mid-decade to a high in 2017. Light vehicle (<3.5t) markets peaked in Europe and the US in 2016, and in China in 2017, while global heavy truck demand reached record levels in 2018.

Since then, however, each market has encountered difficulties, and as the curtain falls on 2019, optimism for a new decade of mobility is balanced by further evidence of a particularly difficult start to the 2020s for the global light vehicle market.

As the curtain falls on 2019, optimism for a new decade of mobility is balanced by further evidence of a particularly difficult start to the 2020s for the global light vehicle market

“Global light vehicle demand is set to decline for the second year in 2019, with weaker performances in most major regions except the EU+EFTA, led by a 9-10% drop in China,” says automotive industry analyst Jonathan Storey. “Overall sales at a forecast 89 million units are still very healthy in historic terms, but are over 4 million units below the 2017 peak,” he adds, noting that this is equivalent to 16 medium-sized assembly plants.

A number of factors have led to the collapse of consumer demand in India, hitting that country’s automotive industry hard—down by over 13% in the first 11 months of the year—and in percentage terms, India leads the decline in vehicle demand across the BRIC markets, with China also seeing a continued fall in the market.

Difficult market conditions are being attributed to a number of drastic measures being taken across the global automotive industry, with suppliers and automakers cutting everything from marketing budgets and costly show attendance, to drastic job cuts in their thousands.

2020 will also see the continuation of a cyclical downturn in global truck demand, and truck makers are already beginning to feel the effects through order cancellations

“While the automotive industry’s players are well used to the cyclical nature of their sector, this downturn has come at a particularly inopportune time as all automakers are needing to make substantial investments to meet the challenges of electrification, carbon reduction and new approaches to mobility, all the while maintaining and renewing their existing model ranges,” explains Storey, who has authored an Automotive World report on the outlook for the global vehicle market in 2020.

In North America, 2020 will see the early stages of transition from NAFTA to USMCA, agreed between the US, Mexico and Canada in December 2019 and still to be ratified by lawmakers in each country; and the Conservative Party’s landslide victory in the UK parliamentary election gives Prime Minister Johnson the majority he requires to force through his Brexit deal, with the UK now almost certainly leaving the European Union—nominally at least—by the end of January 2020. These milestone events mark the start of significant new trading arrangements and in the case of Brexit, only the start of potentially years of business uncertainty, with the automotive industry set to be heavily affected.

2020 will also see the continuation of a cyclical downturn in global truck demand, and truck makers are already beginning to feel the effects through order cancellations. The report forecasts a 6-7% decline in global truck volumes, with negative growth in Asia, Europe and NAFTA.

2020 will see the early stages of transition from NAFTA to USMCA and the landslide victory in the UK parliamentary election gives Prime Minister Johnson the majority he requires to force through his Brexit deal

Nonetheless, there is some cause for optimism. “It looked as though the global economy would end 2019 in much the same way it started, beset by uncertainty over trade relations,” said Storey. “However, at the time of writing, the apparently imminent prospect of a ‘Phase One’ trade agreement between the US and China and a solid win for the UK’s Conservatives in the December general election both go some way to removing much of that uncertainty, as seen by the upturn in major stock indices in the most affected countries.”

Despite the challenging conditions, the report forecasts growth—albeit weak, at less than 1%—in global light vehicle demand in 2020, with declines in eastern Europe and NAFTA expected to be offset by growth in other regions.

“The prospects for 2020 look brighter and global demand is expected to return to weak growth,” said Storey, adding the caveat that, “with the bulk of growth occurring in markets with lower-profit margins, the automakers will remain under pressure during the year.”

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