European Car Makers' Latest Pandemic Problem: Glut of Unsold Vehicles
17 June 2020 - 4:29PM
Dow Jones News
By William Boston
BERLIN -- After reopening factories and sorting out supply
chains, Europe's car makers are facing a new problem related to the
coronavirus pandemic: a glut of unsold cars.
New-car sales in the European Union, in its affiliate free-trade
association partners and in the U.K. fell 57% in May from a year
earlier to 623,812 vehicles, according to data published Wednesday
by the European Automobile Manufacturers' Association.
Each of the 27 EU member states reported double-digit-percentage
declines in new-car sales, and the U.K. was down 89% from a year
earlier. The data marked a small improvement following steeper
drops in March and April, but new-car sales across the region
remain far below last year's.
Production is still well below precrisis levels, but with such
comatose demand even this reduced output is creating a surplus of
new cars, producing a bottleneck that is slowing down the
industry's recovery and threatening jobs and profits.
European executives say they are concerned that while China's
automotive industry is snapping back and the U.S. sector looks as
though it could follow suit, Europe's recovery might take longer
because of oversupply and government incentives designed to boost
the small electric-car market.
Industry analysts and European car dealers estimate that unsold
cars on dealer lots are at least 30% above normal, preventing
dealers from ordering new vehicles from manufacturers. Before
production can fully recover, dealers will have to sell millions of
older vehicles.
"Unsold stocks are climbing, and on the other hand vehicles are
not leaving the lots," said Antje Woltermann, managing director of
the ZDK industry group, representing Germany's car dealers and
repair shops, adding that unsold inventory in Germany alone was
about EUR15 billion ($17 billion).
While Europe continues to fall, China's auto market is posting
gains. Volkswagen AG, the world's largest auto maker by sales and
the largest foreign car manufacturer in China, reported steep
declines in sales everywhere in the world except China last month,
where it posted a 6% increase in sales.
"The return of these kinds of figures is encouraging and gives
us continued cautious optimism going forward," Stephan Wöllenstein,
chief executive of Volkswagen Group China, said in a statement.
Countries such as France and Germany, two of the biggest auto
markets in Europe, have approved billions of euros in cash
incentives to encourage consumers to buy cars. But while France is
supporting purchases of both conventional and electric cars,
Germany is focusing on electric and hybrid vehicles, doing nothing
to help address the glut of unsold gasoline and diesel cars.
The market for plug-in electric vehicles remains a niche,
accounting for about 7% of EU new-car sales in the first quarter,
or 167,132 vehicles, according to the European manufacturers'
group.
The recent decisions regarding cash incentives marked a rare
lobbying setback for an industry that had pushed for conventional
cars to benefit from the measures. Auto executives had argued that
replacing older diesel and gasoline cars with new, less-polluting
models would benefit the environment.
"There is a disconnection between the incentives and what is
needed," said Stefano Aversa, vice chairman of AlixPartners, a
consulting firm. "Governments are not being pragmatic; it's a bit
ideological."
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
June 17, 2020 02:14 ET (06:14 GMT)
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