This year may have been full of uncertainties and risks. However, the EIU predicts it to be a year of slow, painful recovery after a disastrous 2020 – especially for industries. We look at EIU’s summary of 2021 outlook. The automotive industry is expected to register double-digit growth in its sale of new vehicles globally, owing to the previous year’s decline. The sale of new vehicles is likely to increase led by passenger vehicles in terms of the number of units sold. Electric vehicles will register a percentage growth. Passenger cars should increase by 15% sales volume in 2021 and commercial vehicles by 16%. In addition, EV global sales will increase by 37% this year.
Despite the projected strong recovery pace, it cannot make up for damage the COVID-19 pandemic caused. Vehicle sales are unlikely to return to 2019 levels except for four countries. These are China, Turkey, Taiwan and Ukraine. The vehicle markets in these countries were already in decline before the pandemic, leaving them with a lower base to rebound from.
The EIU report identifies the following four key trends for 2021.
1. Restructuring and bankruptcies will reshape the industry
Bankruptcies are bound to multiply as automakers accelerate their consolidation and restructuring plans in 2021. In January, Marelli, an auto-parts makers that just emerged from a merger will stop production at an automotive-lighting plant in Michigan. Honda will close Swindon plant in the UK in July. In the same month, Nissan will close a large facility in Barcelona, which primarily makes electric vans and pick-ups. Consolidation will pick up among global automakers like the mega-merger between Fiat Chrysler Automobiles (FCA) and Groupe PSA that will create Stellantis. Asia will see less restrictions. However, this will come with less investment, with many companies putting expansion plans on hold and global automakers withdrawing from their weakest markets.
2. Government incentives will support Electric Vehicles (EV) sales particularly in Europe
In the EV market, Europe’s market will outpace China. Generous incentives and subsidies offered in the EU pushes this trend as governments strive to fuel a green economy. EU’s share of the global market is set to increase to 31% from 22% in 2019. Meanwhile, that of China will drop from 52% in 2019 to 45% in 2021.
3. China’s role in automotive supply chains will remain
The rivalry between China and the US will continue to cast a shadow over the automotive industry. The battle between the two will be over both tariffs and technology. The US is likely to impose heavy tariffs on auto parts imported from China. Sanctions and investment restrictions may push third-party countries to choose between the two rivals.
4. Digitalization will offer new ways to buy cars
Car companies and dealers will make it more convenient to make vehicle purchases from home since motorists are likely to remain wary of visiting dealerships. Online sales in the overall new-car market are bound to rise to 10%. In January 2021, the consumer-finance arm of Banco Santander, a Spanish bank, plans to launch an online marketplace for cars in the UK.