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December 2020 | Platform

What can we expect from the automotive sector at the end of 2020

  • Before the end of the year, it is expected that the automotive market in China will accelerate its recovery.
  • In Europe, mainly due to the increasing mobility restrictions, the market is estimated to experience a decline of 15% to 20% in global sales.

With just over a month left in this atypical and challenging 2020, which has compelled the automotive industry to undergo significant transformations, the sector is asking: What can be expected in the last quarter of the year? The initiative "Autoparts from Spain," driven by the Spanish Association of Automotive Suppliers (SERNAUTO) in collaboration with ICEX Spain Export and Investments, identifies the latest changes that will shape the automotive sector for the remainder of the year:

 

Recovery in China and emergence of new opportunities for the automotive sector in Europe

 

According to estimates from the China Association of Automobile Manufacturers (CAAM), a total of 2.54 million vehicles were registered in October, an 11% increase compared to the same month last year. Since registering a 4.4% increase in April after the first wave of Covid-19, the Chinese market has continued on a growth trajectory. Experts and analysts agree that this upward trend in the Chinese market will continue in the coming months and will 'pull' the global automotive market.

An example of this is the export data to China from Spanish automotive suppliers in the second quarter of 2020: a 3.6% year-on-year increase, reaching a figure of 154 million euros. Additionally, South Korea, with a 30% increase, and Australia, with a 25% increase, reflect the gradual recovery of Southeast Asian and Oceanic economies.

 

Acceleration of the sector's race towards digitized and sustainable mobility

 

Prior to COVID-19, the sector was already undergoing intense transformation towards a more decarbonized economy, addressing the challenges of digitization, connectivity, and automation, all under the premise of sustainability. However, during the months of experiencing this health crisis and the remaining month of 2020, we will see an acceleration of this process.

In Germany, we will see a restructuring demand in the automotive supplier sector to adapt to future automotive trends (electrification, digitization, and autonomous driving): new products, qualified personnel for new tasks, and a significant investment in R+D," adds Mario Buisán, Economic and Commercial Counselor of the Spanish Embassy in Berlin.

Slight rebound at the end of the year (compared to previous months) in sales for automotive suppliers in Europe

 

In Europe, due to the increasing mobility restrictions, different results are expected compared to the Asian market. According to the S&P Capital consultancy, a general decline of 15% to 20% in global car sales is estimated.

Regarding the automotive components sector, in Spain, an estimated decline of between 20% and 30% in revenue is expected, unprecedented figures in the more than six decades of history and presence of automotive component manufacturers in our market," adds José Portilla, General Director of Sernauto. However, the export figure for Spanish automotive components in the second quarter of 2020 reached 5.024 million euros. In terms of comparison with the first quarter of this year, sales have shown some recovery in markets such as Portugal (+6.4%), Italy (+4.8%), Poland (+1.1%), Czech Republic (+6.4%), Slovakia (+3.9%), Slovenia (+18.6%), or the Baltic countries.

In the German market, the situation of component manufacturers also reflects the general contraction of the sector. "Although due to the support measures for the sector undertaken in Germany in recent months (measures to avoid workforce reductions through the regulation of 'Kurzarbeit' or training plans to qualify employees for new tasks), a slight increase is expected in the last quarter of the year. Thus, although a recession of around 5.8% of GDP is expected for this year 2020, a broad recovery is predicted in 2021, which could result in a GDP growth of approximately 4.4%," adds Mario Buisán.

 

First repercussions of Brexit

 

Brexit is another challenge that has shaken the sector in recent months, as the United Kingdom is one of the main trading partners of the major European players in the automotive industry. German manufacturers see their relations with the main destination for their vehicle exports at risk, and in the case of Spain, it is the fourth main destination for automotive suppliers' sales. In fact, the Spanish sector has experienced a sharp decline in exports to this market in the second quarter, with a 36.1% drop compared to the same period in 2019.

Mª Begoña Llamazares, AutopartsfromSpain Platform Coordinator, and SERNAUTO Market Segment Head.

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