Moody’s Investors Service has released a new report indicating a negative outlook on the global automotive manufacturing industry, based on the company’s expectations for a contraction in global light vehicle sales over the next 12 to 18 months.
Prospects have dimmed for near-term recovery in global sales
Moody’s is maintaining a negative outlook on the global automotive manufacturing industry based on the expectations for a contraction in global light vehicle sales over the next 12 to 18 months. The report expects global sales to fall 3.8% in 2019 and 0.9% in 2020. Revised forecast largely reflects a further weakening in demand in China and Western Europe. While Moody’s had expected Chinese auto sales to swing back to modest growth in 2019, sales have continued to slide during the first half of the year, affected by the ongoing US-Chinese trade talks and a difficult year-over-year comparison. At the same time, Western European car sales have also fallen during the first half.
US auto sales still on track to decline in 2019 and 2020
Moody’s continues to expect light vehicle sales in the US to decline 2.9% in 2019 to 16.8 million units before slipping 0.6% in 2020 to 16.7 million units. The modest contraction in demand is being driven by less aggressive incentives and increased competition from the used car market.
Western European sales take a turn for the worse
Moody’s expect Western European light vehicle sales to fall 2% in 2019 and 3% in 2020, which represents a shift away from the previous forecast of about 0.5% growth both this year and next year. There is a reduced passenger car sales expectations for all key European markets for the current year and 2020, especially Italy and Spain, although demand for light commercial vehicles
will likely remain healthy.
Sales to be modest but steady in Japan
Japan is the only major auto market where annual sales are likely to increase, albeit modestly. After light vehicle unit sales during the first half of 2019 came in somewhat weaker than we had expected, we lowered our light vehicle sales growth forecast to 0.4% for this year and 0.6% for 2020, down slightly from our previous projections in March of 0.9% and 0.7% growth, respectively.
Emerging market demand to weaken before rebounding in 2020
A variety of country-specific factors will contribute to a decline in light vehicle sales across a broad swath of key emerging markets in 2019, before demand recovers next year. In India, we
expect auto sales to swing to a 3% decline in 2019, from strong growth of 8.4% in last year, before rebounding 5% in 2020. While demand in Brazil continues to grow in line with Moody’s expectations, we now anticipate a 3.8% decline in Russian auto sales before a 3.5% rebound in 2020.
Steeper declines possible amid geopolitical uncertainties
While Moody’s expect no more than a modest decline in global auto sales through 2020, the risk to the downside is greater than it was a year ago due to a number of converging geopolitical factors. Trade tensions, particularly between the US and China, and the increasing likelihood of a no-deal Brexit could have both direct and indirect ramifications for auto manufacturers.