The European car industry is struggling: what happens to sales

Sales in Western Europe could be below 10 million this year, just two-thirds of the 2019 total of 14.3 million, LMC Automotive said.

Sales of new cars in Western Europe could fall below the 10 million mark this year due to continuing supply chain problems, forecaster LMC Automotive said this month.

The LMC forecast of 9.81 million passenger cars sold in the region would be just two-thirds of the pre-pandemic level of 14.29 million in 2019. This figure is 7.4% below 2021 and 24.5% below 2020, which has endured most of the outages caused by coronavirus.

“Risks are still downward, with the most immediate threat to the forecast being a longer-than-expected conflict in Ukraine or a disrupted supply chain exacerbated by China’s COVID-19 policy,” the LMC said in a statement. report.

LMC said the demand side was “increasingly bleak”, with consumer confidence at its lowest ebb since the beginning of the pandemic in the first quarter of 2020.

By May, sales in the 17 countries in the region had fallen by 13.6%, LMC said this week, Germany by 10.2%, the United Kingdom by 20.6%, Italy by 15.3% and France by 10.1%.

A number of carmakers, however, say they are confident that the persistent shortage of microchips will be mitigated in the second half of the year. Such forecasts were not made in mid-2021, but what is different now is an expected decline in demand for consumer electronics due to inflation and other pressures.

Mercedes-Benz, Daimler Trucks and BMW are among the carmakers now getting enough high-tech components to produce at full capacity after months of paralyzing disruptions.

Recurring problems

Part of the new availability of chips comes from a weakening economic outlook and inflation, which has reduced the demand for consumer electronics that use components as well.

Automakers have been stuck in microchip production at major production sites since the end of 2020 as demand for consumer electronics increased during the pandemic. In addition, the auto industry underestimated demand following the initial wave of blockages, analysts said.

As a result, carmakers have given priority to the production of high-margin models, keeping – and in some cases suddenly increasing – profits at the expense of several lower-end models.

Another forecaster, Sam Fiorani of AutoForecastSolutions, said this week that “there are few positive signs that encourage a more positive short-term outlook, but there are some signs.”

Fiorani cited a shift in the production of key wiring from war-torn Ukraine to Morocco and Mexico and new semiconductor offerings in Taiwan. The Skoda brand from VW, based in the Czech Republic, plans to make its own harnesses.

In terms of production, S&P Global Mobility (formerly IHS Markit) said in mid-May in its latest report that improvements were seen for Europe and South Asia compared to previous forecasts.

IHS expects European light vehicle production to reach 16.6 million vehicles this year, up from 15.9 million in 2021 and rising to 18.3 million next year.