CAR DISASTER: ANOTHER COLLAPSE OF SALES IN MAY. Who will keep the factories open?

In May, sales of new cars in the EU plummeted, falling by 57% and reaching the very low value of 623,812. This creates, in the old continent, an effect that has already been seen several times in the USA, that is, huge squares full of unsold cars.

All 27 EU Member States reported double-digit declines in new car sales, with the UK down 89%, according to MarketWatch. A slight improvement compared to April, but still dramatic, a symptom of a sector in very deep crisis.

The real problem is that production has resumed and returned to a similar level to the pre-Covid moment, but the latent demand: in fact an industrial plant has a minimum production level below which it just closes, but it does not it can force the consumer, exhausted in income and disheartened about the future, to buy. This creates a major inventory problem that has thrown the entire distribution chain into a tailspin, slowing it down and filling it with ancillary charges, from the rents of the areas to place these cars to the interests for this huge frozen capital, to the slowdowns in the entire supply chain.

The cars in the parking lots of the dealers are about 30% more than normal, while the unsold inventory in Germany alone was worth about $ 17 billion, all money that is stopped and does not make anything. This worries above all our German friends who, however, trust in exports to China: in fact, at least there, sales grew by 6% in May. VW, Mercedes and BMW have invested heavily in that market and hope to unload their surpluses there, but this will not be easy, because the danger of relapsing the Covid-19 can lead to sudden sales collapses.

Germany has offered an increase in contributions for those who buy new cars, help that can reach € 6,000, but only for electric cars. Too bad that the bulk of the car in the deposits is internal combustion, traditional, so they remain in the parking lots, to clog them. Paradoxically, the regulatory confusion does not take off the demand for cars, even the most ecological. Soon, without a recovery in demand, the season of layoffs and mass layoffs will come.

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The article CAR DISASTER: ANOTHER COLLAPSE OF SALES IN MAY. Who will keep the factories open? comes from .

This is a machine translation of a post published on Scenari Economici at the URL on Fri, 19 Jun 2020 12:54:29 +0000.