Western European new car sales could dip below the 10 million mark this year because of continuing supply chain issues, forecaster LMC Automotive said this month.
LMC’s forecast of 9.81 million passenger cars sold in the region would be only two-thirds of the pre-pandemic level of 14.29 million in 2019. That figure is 7.4 percent below 2021 and 24.5 percent below 2020, which bore the brunt of coronavirus shutdowns.
“Risks still lie tilted to the downside, with the most immediate threat to the forecast posed by a longer-than-expected conflict in Ukraine or worsened supply chain disruption because of China’s COVID-19 policy,” LMC said in a report.
LMC said the demand side looked “increasingly gloomy,” with consumer confidence at its lowest ebb since the start of the pandemic in the first quarter of 2020.
Through May, sales in the 17 countries in the region are down 13.6 percent, LMC said this week, with Germany down 10.2 percent, the UK down 20.6 percent, Italy down 15.3 percent and France down 10.1 percent.
A number of automakers, however, say they are confident that the persistent shortage of microchips will ease in the second half of the year. Such predictions in mid-2021 did not pan out, but what is different now is an expected drop in demand for consumer electronics due to inflation and other pressures.
Mercedes-Benz, Daimler Trucks, and BMW are among automakers now getting enough of the high-tech components to produce at full capacity after experiencing crippling outages for months.
Some of the new availability of chips stems from the weakening economic outlook and inflation, which has cut into demand for consumer electronics that also use the components.
Automakers found themselves locked out of some microchip production at major production sites starting at the end of 2020, as consumer electronics demand surged during the pandemic. In addition, the auto industry underestimated pent-up demand following the initial wave of lockdowns, analysts said.
As a result, automakers prioritized production of high-margin models, preserving – and in some cases sharply increasing – their profits at the expense of more lower-end models.
Another forecaster, Sam Fiorani of AutoForecastSolutions, said this week that “few positive signs are emerging to encourage a more-positive outlook in the near term, but some signs do exist.”
Fiorani cited a shift in production of key wiring harnesses from war-torn Ukraine to Morocco and Mexico, and new semiconductor deals in Taiwan. VW’s Skoda brand, based in the Czech Republic, plans to make its own harnesses.
On the production side, forecaster 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 with earlier predictions.
IHS expects overall European light-vehicle production to reach 16.6 million vehicles this year, up from 15.9 million in 2021, and jump to 18.3 million next year.