Pace of the decline in global auto sales “moderated” in May, report says
The latest Global Auto Report from Scotiabank says that a slow climb back has begun for global auto sales.
The pace of the decline in global auto sales moderated in May as purchases posted a “mere” 35% year-over-year (y/y) drop, a new report from Scotiabank says.
According to Scotiabank’s latest Global Auto Report, on a month-over-month basis, global sales accelerated by 40% (sa) following April’s record 46% y/y decline. Global annualised sales were 51 million units in May, the report said.
“Parts of the world are benefiting from post-pandemic pent-up demand as their economies (and dealerships) re-open,” Scotiabank said. “This notably includes China where sales exceptionally sit in positive territory (7% y/y), while other parts of Asia, Europe, and the U.S. and Canada are seeing surges in sales activities, albeit still below pre-crisis levels.”
There remains considerable uncertainty around the strength and duration of this near-term post-pandemic rebound before fundamental economic drivers take over, the report noted. “For most countries, this suggests a multi-year recovery as elevated unemployment dampens consumption,” Scotiabank said.
“While aggregate auto sales have reversed direction in May, some countries continue to face pandemic outbreaks to the continued detriment of auto sales,” the report noted. “Notably, Latin America has yet to enjoy a rebound, along with other frontier economies such as India.”
The road to recovery will be protracted, the report also said. “The Bank of Canada recently set out three distinct phases of this crisis: containment, re-opening, and recuperation,” Scotiabank said. “Global auto sales in March through April clearly illustrated the impact of the containment phase as many dealerships were closed, except for online sales. A rebound, beginning in May, should continue over the next several months as economies gradually re-open. But activity is likely to slow thereafter as economies enter a recuperation phase, working through excess capacity amidst dampened consumer demand.”
In Canada, Scotiabank noted, government responses are also helping dealers cope with impacts from the downturn. “A recent survey conducted in early June by the Ontario Motor Vehicle Industry Council suggests that more than half of dealers have accessed the Canada Emergency Wage Subsidy, while close to 60% of their workforces have tapped into the Canada Emergency Response Benefit,” Scotiabank said. “Nevertheless, consumer confidence will ultimately drive the recovery according to more than 80% of respondents, well above lower costs of financing or increased incentive spending.”
Looking forward, Scotiabank anticipates global auto sales will sit 20% below 2019 levels by the end of 2020. “There will be tremendous variability across countries with China expected to narrow its gap, many advanced economies to witness annual losses in the order 20–30% y/y, while the hardest hit economies facing prolonged pandemic could see declines closer to 35-40% y/y,” the report said.