VDA expects car sales in Germany and Europe to lose around one quarter in 2020

The corona pandemic has caused collapsing vehicle markets around the world and plunged the industry – in Europe and Germany in particular – into its worst crisis for decades. “The collapse on the markets is unprecedented in both its size and its global scope,” stressed Hildegard Müller, President of the German Association of the Automotive Industry (VDA), at the organization’s half-year press conference.

In the first half of 2020, new registrations of passenger cars in Germany fell by almost 35 percent to 1.21 million cars. That is the lowest result for the first half of any year in Germany since reunification 30 years ago. The picture is similar on the international markets. The European passenger car market shrank by 43 percent in the period up to the end of May, while the US market lost 23 percent, and the Chinese market lost 27 percent.

A slight recovery seems to be on the horizon for the second half-year. One indicator is the number of orders arriving at German OEMs, who recorded a much smaller year-on-year fall in orders in June than in May. But even a continued upturn will not be nearly enough to compensate for the collapse in the first half-year.

The VDA expects the global passenger car market to decrease by 17 percent over 2020 as a whole, down to 65.9 million units (79.5 million in 2019). The contraction will be especially severe in Europe, amounting to 24 percent. The VDA expects around 2.8 million new car registrations in Germany this year (-23 percent). The slump will be somewhat less pronounced in the US (-18 percent) and China (-10 percent). The forecasts are based on the assumption that the corona pandemic can be contained both in Europe and in other parts of the world.

Commercial vehicle markets are even harder hit

The crisis is hitting the markets for commercial vehicles even harder than the passenger car markets. According to VDA forecasts, worldwide sales of commercial vehicles with a maximum permissible weight of over 6 tonnes will fall by 24 percent to 2.6 million units in 2020. The association expects the US market to contract by 40 percent. There will also be unprecedented losses in Western Europe (-35 percent) and Germany (-29 percent).

Passenger car production down 40 percent in first half-year

The dramatic collapse in demand, interrupted supply chains, and production stoppages lasting for weeks have brought first-half-year passenger car production in Germany to its lowest level for 45 years. From January to June, the German facilities built just under 1.5 million vehicles, i.e. 40 percent less than in the same period last year. The VDA president expects total domestic car production in 2020 to reach 3.5 million units (-25 percent). Here, too, the initial slow signs of recovery would not be expected until the second half-year. The VDA forecasts that exports from Germany will decrease by 27 percent in 2020; in the first six months of this year they lost 40 percent and totaled only 1.1 million units.

These falling figures have not yet had a major impact on employment. The number of employees in the German automotive industry came to 814,000 at the end of April, i.e. roughly three percent less than one year before. However, it should be remembered that at present around half of all automotive employees are on short-time work. “The massive cuts in production have severe consequences not only for manufacturers, but also for many mid-sized suppliers in particular,” Hildegard Müller said. “We must assume that the workforce will shrink some more before the end of 2020.”

High levels of investment in electric mobility and digitization

“The top priority in the current situation must remain the best possible protection for people’s health,” Müller emphasized. Germany, she added, had so far managed to contain the pandemic very effectively. “We should all guard against becoming careless, because the virus is still here.” Regarding the economy in general, Müller stated that now the most important thing was to maintain the industrial base in Europe and Germany, and to safeguard employment. “In the automotive industry there is the additional factor that it is driving forward its transformation in new powertrains and digitization. Those are huge challenges.”

The VDA’s member companies will invest considerable sums in the transformation during the period up to 2024, with 50 billion euros going on new powertrains alone, and another 25 billion euros on digitization. The range of e-models available from German brands will more than double from its current 70 to over 150 by the end of 2023. Furthermore, the German OEMs markedly increased their share of new e-car registrations in Germany from 48 percent to 66 percent in the first five months of this year. Seven of the ten bestselling e-models are from German group brands.

“We still need – also with a view to international markets, growth and employment – an intelligent mix of models, from battery-electric cars all the way to economical, low-emission vehicles with advanced gasoline and diesel engines,” Müller said. Plug-in hybrids in particular offer enormous opportunities here. Müller continued: “They combine the best of both worlds – emission-free driving on shorter and medium journeys, and the necessary and efficient range over long distances.” And when it comes to achieving the great goal of climate-neutral mobility, hydrogen and renewable e-fuels will become more important. According to Hildegard Müller, cars will remain an integral part of future climate-friendly mobility. “The demands placed on the modes of transport are different, for instance, in urban and rural areas. It will therefore be crucial to use the best solution in each case, to take the reality of people’s lives into consideration, and to follow a path to the mobility of the future which is open to all technologies.”

Europe needs an ambitious climate-action and industrial stimulus package

The core task must now be to limit the economic consequences of the pandemic, the VDA president said, adding: “How will the economy develop? What effects will the stimulus measures have? What additional steps can policy-makers take – will they agree on an EU recovery plan, for example, that will protect the climate but also have a positive impact on industry?”

“The EU therefore also needs an ambitious industrial package to emerge from the crisis,” Müller underscored. It should focus on growth and investment. That would include consistent expansion of the infrastructure for electric mobility and hydrogen, ramping-up e-fuels, and investment in digitization. She continued, “We welcome the German Government’s support for a fleet renewal program for trucks at European level. It is important to include trailers and semi-trailers in the program. Now it is essential for Brussels to make decisions swiftly and implementation to start soon. Today we must lay the foundation stone for future growth.”

The new IAA

Innovation, digitization, alternative powertrains and a wide-ranging social dialog on sustainable and connected mobility are also core elements of the IAA – that will be held in Munich for the first time in September 2021. “We also want the new IAA to showcase the mobility of the future in all its facets and to enter into dialog. The IAA will provide impulses for connecting all modes of transport,” Müller explained.