Coronavirus: what impact on the automotive industry?

The crown virus is taking its toll on companies like Tesla. According to Bloomberg, Morgan Stanley has lowered its sales target from 500,000 vehicles to 452,000. Additionally, it has reduced its price target for the stock from $500 to $480, which keeps its rating below weight.

The automotive sector has been affected by the coronavirus since February. The truth is that some brands are heavily impacted by the halt in industrial production in China.

Faconauto, the employer that integrates dealer associations, explained it this way:

“The coronavirus outbreak in China could prolong the decline in vehicle sales and derail production in the country and the global market.”

&Different analysts worldwide add that production in China has decreased by 2% since February. And that the automotive industry in the European Union could face a drop of $2.5 billion due to reduced exports of cars and parts from China.

For its part, the rating agency Moody’s expects that global vehicle sales will decrease by 2.5% in 2020. But this assumption is based on the containment of the virus by the end of March. If that were the case, the repercussions on the new car markets would be less severe because the industry would have the rest of the year to recover.

If that were the case, the forecasts for 2020 would not be too severe.

Moody’s adds that manufacturers generally accumulate stock, at least of their most popular and cheapest models. And this should allow for some inertia regarding new car registrations.

However, this general assumption will change quickly if Covid19 persists throughout the current year and even beyond.

The case of Tesla and the crown virus

Analysts are lowering forecasts for the automotive industry as a whole. The cancellation of auto shows has prevented the presentation of new models. Furthermore, stock market declines are affecting brands.

Bloomberg states that the sector will be impacted due to reduced incentives in markets such as Norway and the Netherlands. But also because of the viral crown. Analysts are reducing forecasts for the industry as a whole.

As an example, Tesla, for which Bloomberg forecasts a sales decline of about 10% in Europe this year. According to Morgan Stanley:

“A Tesla is a discretionary and high-priced purchase. It is reasonable to assume that sentiment and the financial strength of Tesla’s order book will be somewhat affected by the significant correction in global markets. Also due to concerns about public safety and disruption of personal mobility.”

Tesla’s stock fell 7.6% to $585.90 yesterday morning, the 12th, in New York. This aligns with the drop in stocks in global markets due to the threat of the coronavirus. And that is why Tesla has recorded a drop of up to 52% this year after two consecutive quarters of better-than-expected gains.

The evolution of the sector is unpredictable until the virus is contained.