12 May 2020
Autovista Group has released an updated whitepaper on the impact of the coronavirus (COVID-19) and the economic crisis on used-car markets across Europe. It includes scenarios and expert commentary on current market conditions and outlook to help track the impact of the coronavirus pandemic across major European markets.
Like many sectors of the economy, the automotive sector is entering the ramp-up phase post severe COVID-19-induced lockdowns in many European countries. The impact has been tremendous. Autovista Group estimates that economic losses for dealers alone during the lockdowns have amounted to €1.8 billion in Europe so far. Main drivers are the ageing of stock and the cost per day of stock holding during a time when few transactions have taken place.
Significant drops in residual values, owing to reduced private demand and the burgeoning economic crisis, are visible only in those markets that had either no lockdown or one with reduced impact on dealers. In Sweden and Finland, where dealerships have remained open for business, residual values have dropped by 2%-3% since the beginning of March.
In the May update of the Autovista Group whitepaper on the impact of COVID-19 on used-car markets, which now includes residual value forecasts for 13 countries, countries across Europe confirm the high likelihood of a drop in RVs during the coming months. Its magnitude depends on how each market passes through the emerging economic crisis. The majority of Autovista Group editors have assigned highest probabilities to a ‘medium risk scenario’ for residual values. The expected impact on residual values will be sizeable but less dramatic than what we saw during the last financial crisis.
‘During the 2008/2009 crisis in Germany and Spain, average declines of 12% and 15% across segments built up over 12-18 months,’ according to Autovista Group chief economist, Christof Engelskirchen. ‘The COVID-19-induced economic crisis will be different. Governments have taken much stronger policy actions against the collapsing demand, the current economic shock is not paired with a lack of financing opportunity and, after the peak of the crisis, we would hope to see some pent-up demand as private consumers will regard the shock as temporary.’
The impact of the economic crisis on RVs will be felt differently depending on country and circumstances. Autovista Group expects a sharper drop in RVs in the Southern European countries, of around 5%-6% at the peak of the crisis. The DACH and Nordics regions will suffer less based on the current risk assessment. A more elastic recovery could be anticipated in Eastern Europe.
Economic losses keep building up the longer markets remain shut. Pressure on dealers to turn stock quickly will increase, once they re-open. During the ramp-up phase and throughout this year, it will be important for OEMs to support dealers financially and help them to install appropriate programmes and tools to engage with customers. For dealers, it will be pivotal to avoid giving in to the temptations of discounting.
More detail on the early impact of the coronavirus and the outlook for market recovery is available in Autovista Group’s updated whitepaper: How will COVID-19 shape used car markets? Scenarios for residual value development in Europe for 2020, 2021 and 2022. Download your copy here.