Global Auto Business Threatened by Covid Second Wave

Utilization had already been declining from a healthy level of 70% and above, prior to the pandemic. Chart courtesy of LMC Automotive.

The financial health of the global auto business remains threatened by Covid 19 and it could be just as deadly. This comes from the latest forecast from consultancy LMC Automotive as it takes a steely-eyed look at the pandemic and its ongoing economic destruction.

While the past isn’t a 100% sure predictor of the future, “A second wave and stricter social controls pose a large risk to our central forecast,” LMC notes in its latest analysis. LMC projects that 2020 global assembly plant use is expected to fall to the lowest level ever recorded – just 51%. The pandemic-caused shutdowns during March and April had a profound impact on both the volume and use of plants globally.

However, North America’s capacity use is expected to reach its highest level in 2020. Light vehicle truck plants are grappling to meet demand since the shutdown.

But the Detroit Three still have global problems because of their large investments in new assembly plants in China, lower volume from EV plants, as well as general localization trends. Utilization had already been declining from a healthy level of 70% and above, prior to the pandemic.

Overall global plant use is expected to return to only the same level reached during the 2009 trough from the Great Recession by 2024.

The kicker: “overcapacity remains a risk for the industry from our May forecast low point,” says LMC. (see AutoInformed – LMC Automotive Now Projects Double the Decline of the Great Recession in Light Vehicle Sales During 2020 and COVID-19 Chaos as LMC Automotive Cuts Global Light Vehicle Sales Forecast by 3.7 Million Units)