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Auto Industry Loses Sales, Adds Debt Because of COVID-19

Bill Koenig
By Bill Koenig Senior Editor, SME Media

The global auto industry is losing sales and increasing its debt because of the novel coronavirus (COVID-19), consulting firm AlixPartners said in a presentation this week.

The company is forecasting global deliveries of 70.5 million vehicles and U.S. sales of 13.6 million for 2020. The U.S. downturn comes after years of U.S. deliveries of more than 17 million vehicles annually.

There were “massive” lost vehicle sales from March through May, said Mark Wakefield, global co-leader of the Automotive and Industrial Practice at AlixPartners. The consulting firm also said the industry won’t again reach peak sales levels until 2025.

AlixPartners estimates the industry this year added more than $72 billion in debt since March. Automakers and a group of 50 suppliers in the U.S. and Europe tapped $52 billion in credit lines and $20 billion in term loans to ensure they had enough cash to get through the downturn.

Companies closed plants temporarily amid the COVID-19 pandemic, with North American factories reopening plants last month.

Automakers also are delaying investments in self-driving and electric vehicles, according to the consulting firm.

“The industry has truly entered this profit desert,” Wakefield said. “There is a lot of uncertainty. That means being very selective on how you do investments so there’s a very clear path to profit.”

With the added debt, he added, “We don’t see an ability to pay it down very fast.”

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