German car sales have dropped 40% since 1989 and are set for the worst year according to Tagesspiegel. In Germany, new car registrations dropped 40% in June and this put Europe’s largest market on track for reaching a 30-year low. Reinhard Zirpel, head of the International Carmakers’ Association, told Tagesspiegel that 220,000 new cars were registered in June, in calendar-adjusted terms of a 40% fall over June 2019.
These numbers not only show the impact of the coronavirus crisis and the economic hit the world took from the months of lockdown, but it also highlights just how much this sector has been affected by the transition to electric vehicles and the scandals over emissions.
Zirpel noted that for the full year, the number of new vehicles registered in 2020 was expected to fall 20% over the previous year to 2.8 million. The last time so few cars were sold was in 1989. This was the year of the German reunification at the end of the Cold War. Zirpel said that even that was an optimistic prognosis. “The cumulative minus up to the end of June is -35%. There will have to be a very strong recovery in the second half to reach -20% at the end.”
The Coronavirus Impact on Global Auto Sales
Back in April, it was predicted that auto sales could fall 80% in Europe and 60% in the U.S. In March, when the coronavirus spread across Western Europe, sales of sedans and SUVs dropped more than 50%. It makes sense, though–people are sick and trying to stay healthy so the focus was on health, not buying new cars.
Western Europe includes all the big markets like Germany, Britain, France, Italy, and Spain. LMC Automotive noted that the sales in Western Europe fell 52.9% in March to 774,280 when compared with March of 2019. Falls by market:
- Italy 85%
- France 72%
- Britain 44%
- Germany 38%
In the U.S., March sales fell to 38.6% but weren’t as bad as the 41.4% drop in February of 2009 just after the financial crisis. LMC’s Augusto Amorin stated in a report, “The (U.S.) results for April and May are set to be even more dismal, bringing full-year Light Vehicle sales to 14.2 million units. This compares with our forecast of 16.5 million in early March. The unprecedented and unpredictable nature of the current health crisis means that we cannot rule out further revisions to this forecast.”
On the flip side, Forecaster IHS Markit isn’t as doom and gloom. It believed that Western and Central European sales will drop only 13.6% in 2020 bringing the numbers down to 15.6 million. It predicted a recovery by 4.2% in 2021. As for the U.S. IHS Markit predicted a worst-case scenario of 11.64 million compared with 17.08 million in 2019. The expected recovery will bring everything together in 2022 to around 16 million.
Electric Vehicles.
The demand for electric vehicles has risen. There’s a 90% increase expected in the number of EVs registered over the first half, for a total of 90,000. Almost half of those were “pure electric vehicles,” while hybrids constituted the majority.
Bloomberg predicted that EV sales would decrease in 2020 due to the coronavirus, but not as much as ICE vehicle sales would. It also predicted that EVs would gradually gain market share in the coming decades, declaring that “long-term prospects remain undimmed.” Global EV sales are expected to decrease by 18% in 2020 yet the sales of ICE vehicles are expected to fall by 23% globally.
By 2040, it is thought that EVs will account for 58% of new-car sales globally, and 31% of the global car fleet. It’s also predicted that EV sales would surpass ICE vehicle sales in 2037. This just doesn’t go for cars and passenger vehicles either–67% of municipal buses, 24% of light commercial vehicles, and 42% of two-wheelers are expected to switch to electric by 2040.
In China and the UK, EV sales, especially Tesla vehicles are on the rise. In China, while experiencing a decline in new car sales in general for 2020, the sales of Tesla Model 3 cars kept rising from month to month. In April, Tesla sold 3,635 Model 3s, and in May that number jumped to 11,095. In China, the Tesla Model 3 is the best selling EV. In the UK, EV sales accounted for nearly 10% of auto sales and are expected to grow especially since the UK is having tax changes that were announced in 2019. Those tax changes became effective in April 2020.
Emissions Scandal
The diesel emissions scandal is a shadow that will haunt the German automakers that participated–probably for many decades to come. In fact, I think the only way they can break free of this shadow if they let go of diesel and made all of their vehicles fully electric. However, that may seem ideal, it doesn’t seem realistic since they’ve shown very little interest in the EV market. Sure, they’ve made their own EVs, but their hearts are not in it. They are just making an EV so they can take a piece of the EV pie and say, “Hey we make them, too, ya know!”
While VW was probably the dirtiest of those that participated, Fiat Chrysler, Jeep, Nissan, Renault, Mercedes-Benze Audi, and Porsche all participated in the scandal. While the average consumer drools over a Porsche or Audi, the trust in these companies has been shaken. They will have to really work hard to gain the trust of the governments and consumers.
With all three of these punches hitting the auto industry, I think that these punches are actually sculpting a new future–one with EVs being the top sellers; gradually becoming the only sellers eventually.