No industry has been left unscathed by the pandemic but the automotive sector, along with aviation, has been among the worst hit. Across western Europe, sales collapsed 80 per cent year on year in April, with barely a car being bought in the UK, Spain and Italy. Global sales of new cars are forecast to fall more than 20 per cent this year. Factories have been shut down and consumers have stayed away from showrooms.
Even before the pandemic struck, carmakers faced plenty of challenges. Sales in key markets were already in decline, and new emissions regulations were forcing an expensive shift to electric vehicles, putting margins under pressure. Job cuts were already on the agenda and many big players were looking at mergers or alliances to cut costs. The pandemic will put these trends into overdrive.
For policymakers, the immediate concern is the survival of an industry that is not only a big contributor to gross domestic product and a big employer, but also for many nations strategically important. In France, President Emmanuel Macron on Tuesday unveiled an €8bn support package including increased subsidies for buyers of electric or hybrid cars and support for research into hydrogen power. He set a target of producing 1m electric cars annually by 2025. His efforts to encourage “reshoring” of production are partly about industrial policy, but also reflect weaknesses that the pandemic has highlighted in global supply chains. Unfortunately for Mr Macron, his package is unlikely to prevent expected big job losses at Renault, one of France’s automotive champions.