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Auto Demand Hits a Pothole

The damage won't be fixed overnight, but we don't believe it's structural.

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Global light-vehicle demand has hit a deep coronavirus pothole. While the extensive damage requires a lengthy repair--we don’t expect global demand to reach more normal levels until 2023--we do not believe the damage is structural. Before the pandemic, we forecast 2020 world light-vehicle demand to be up 1% to down 2%. We now expect 2020 world light-vehicle demand to drop between 17% and 23% as we consider the industrywide closures of dealerships and automobile factories in response to the coronavirus pandemic.

There are risks to our new forecast: There could be another COVID-19 worldwide wave. Our optimistic China forecast for a solid recovery in the second half of 2020 might not materialize. The duration and severity of the U.S. recession could be worse than we expect. Or second-half 2020 demand in Europe might be further adversely affected by Britain’s exit from the European Union (a ratified trade deal is due Dec. 31) and U.S. trade conflict.

Richard Hilgert does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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