WESTERN CAR MAKERS OUT $100 BILLION BUT FIND HOPE IN CHINA

Vehicle makers in Europe and the U.S. will lose $100 billion in revenues if their factories remain shut through the end of this month, according to the AutoAnalysis research firm.
Europe will lose 2.6 million units sold, worth €66 billion; the U.S. will miss 2 million, valued at $52 billion.
For each week beyond April that factories remain idle, the industry will lose another €8 billion in Europe and $7.5 billion in the U.S., the firm said.
Volkswagen is paying €2 billion a week in fixed costs, according to CEO Herbert Diess.
Virtually all auto plants on the two continents were shut down in March to protect workers’ health and because sales plummeted.
Car sales in Europe fell 66 percent in March. U.S. car sales last month fell to 2010 levels.
General Motors has drawn $16 billion in credit to keep operating; Ford has pulled $15.4 from its credit lines. Daimler recently almost doubled its lines of credit to €23 billion.
But, as car showrooms remain dark in Europe and the U.S., China is gradually reopening for business.
On 9 April, the China Passenger Car Association reported sales of just over one million vehicles in March. The number is 40 percent lower than a year previous but more than triple the 300,000 sold in February this year. The February number represented a 79-percent drop year to year.
Mercedes-Benz reported the number of luxury cars it sold in China last month was close to what it was in March 2019, allowing the company to post a profit in this year’s first quarter.
March also encouraged Volkswagen.
“I’m cautiously optimistic that we will be back at the production levels of the previous year by June,” said Stephan Wollenstein, who heads Volkswagen’s China operations.
The company plans to bring back 1,700 laid-off workers in the second half of this month.
General Motors has restarted its 15 Chinese assembly plants but did not report sales there.
“Whoever has a strong foothold in China will be among the winners” in the automotive industry’s post-pandemic survival derby, said Ferdinand Dudenhoffer, director of the Center for Automotive Research at Germany’s Duisburg University.
That’s a lesson for other industries as well.
“China is now carrying the load for many industries,” said Jorg Wuttke, president of the European Union Chamber of Commerce in China.
TREND FORECAST: The auto industry was slowing around the world before politicians slammed the world’s economy shut. The industry will rebound at what seems like a quick pace at first, but that will be relative. The industry’s long-term outlook remains modest at best as people recovering from joblessness and buried in debt put off buying new vehicles.
We also forecast high debt defaults on existing car loans and the price of used and vintage automobiles in long decline.