Passenger Vehicle Market Outlook - 2021

The passenger vehicle industry is witnessing colossal makeover. This revolution is not restricted to autonomous, connected, and e-mobility, but significant change is witnessed in the consumer behavior in terms of mobility usage and buying preferences. The emergence of pandemic in early 2020 has further fueled this situation. 

This article aims at quantifying the trends in autonomous vehicles space, along with the strategies and approaches being adopted by different nations to navigate through these challenging years of transition.

Impact of COVID-19 pandemic on passenger vehicle sales in 2020 and 2021 

The global automotive industry was already in distress since 2018 witnessing declining passenger vehicle sales. The passenger vehicle sales dropped to 68.7 million (-2.9%) in 2018 and further drop was witnessed to 64.7 million (-6.3%) in 2019, which was worse than 2008-09. 

The COVID-19 pandemic further exacerbated the already stressed industry. The extended lockdowns across major automotive hubs globally during the first half of 2020 has resulted to further decline in the passenger car sales to 54.7 million (-15.5%). Although the second half of the year was well off as manufacturing and sales slowly resumed globally. In 2021, across multiple countries, surge in covid-19 cases has led to further lockdowns. However, this time the lockdowns did not impact the market as much as it did in 2020, as the governments realized the importance of running the economies. 

The year 2021 is well off, and by the end of this year the sales are expected to grow by 8 percent globally. Although the growth is better; however, the continuous slump in sales over these years clearly would take almost 4-5 years to regain back the sales volumes of 2017.

Chinese market witnessed surge even during the pandemic period

While all the major markets were in lockdowns, China along with South Korea are the only major markets which witnessed growth trend in second half of 2020. Factories in Hubei province, responsible for more than 9 percent of the supply of auto parts to many manufacturers worldwide, resumed operations after the extended shutdown, as the rest of the world was still suffering shut-down during first half of 2020. Most of the leading OEMs with production facilities in China also soon restarted their plants. However, business-as-usual was witnessed only in second half of 2020. Retail automotive sales recovered unexpectedly as customers gain the confidence to go out to retail stores and test drive new vehicles. By the end of 2020, the total passenger vehicle sales in China shrink to 20.2 million (-5.8%). This year the Chinese passenger vehicle sales rebounded by 5.3 percent.

European region witnessed one of the worst situations in terms of pandemic impact on lives and consequently on the automotive sales performance. The extended shutdown further stressed on the manufacturing facilities in the region. Almost all the German, Italian, French, and multinational automakers had shut down all the production facilities for at least three weeks. The total passenger car sales witnessed decline of record 21.3 percent by the end of 2020 to reach sales volume of 14.1 million. The highest decline in the sales was witnessed in Spain, Italy, United Kingdom, and France, among others. In 2021, the sales rebounded and is expected by 11.3%.

The sales were resilient until February due to positive outlook before the outbreak, however, United States and Canada in the North American region witnessed worst impact on the auto industry due to the pandemic. The passenger car segment was already experiencing continuous decline since 2016, and with pandemic the situation worsened in first half of 2020. However, with restarting the economy and manufacturing centers, the sales improved during the second half. By the end of the 2020, the total passenger vehicle sales declined by 27.7% in United States. However, in 2021, the prospects of sales are better and by the end of this year the sales are expected to grow by 5 percent.

The effect of pandemic on auto industry was no different in Japan. The passenger vehicle sales witnessed a total decline of 11.5%. However, by the end of 2021 the sales are expected to grow by 7.2 percent. 

The setbacks are huge with impact on not only the sales targets but on the working capital, investments especially in the autonomous and connected ecosystem, and risk- taking capabilities of the industry. Certainly, the current trends are a matter of concern for the auto ecosystem, however, the industry is expected to get back on track with complete removal of lockdowns and economies functioning. The manufacturing facilities are now resuming, and the auto supply chain is recovering, but it will take time. Eventually the recovery should lead to rebound in imports and exports. The trend of over depending on one country will become more prominent and the OEMs are finding new spots for manufacturing capabilities. 

The post pandemic situation is still in the flux; however, all the major economies both developed and developing are going through rough times. Piling debt on the countries is further going to negatively impact the economies and consequently affect the auto market.

The economic situation of United States and countries in EU are worst hit and would need a rapid recovery through better policy making. Rapid recovery is possible in auto manufacturing only if the supply chain is back on track and the demand starts picking up. But to get demand back in place, the economic conditions of the consumers’ need to get normal, which is still a distant future. Few countries in the Asian region, especially China, quickly recovered back on track in terms of generating demand. From a more optimistic perspective, the year 2021 is anticipated to see a growth curve in terms of passenger cars demand. Still, auto industry would need minimum of 3-4 years’ time to regain the sales volumes of 2019, while some markets might even take almost 10 years. It is anticipated that the sales could grow by 8 percent globally, reaching 59.1 million cars in 2021