Moody's Investor Service is slashing its global vehicle sales forecast as the coronavirus outbreak reduces demand and disrupts automotive supply chains.
The firm now expects global auto sales to slump 2.5% in 2020 instead of a 0.9% drop previously expected. Moody's cited the COVID-19 epidemic as well as stricter emissions regulations for the overall decline in vehicle sales from 90.3 million to 88 million.
"Cautious consumers are steering clear of crowded areas, including auto dealerships, while corporate demand for vehicles is weakening as broader economic uncertainties cause companies to scale back capital spending," Moody's said in a report Wednesday regarding China.
The new forecast projects sales declines of 2.9% in China, 4% in Western Europe and 1.2% for the U.S. Moody's new forecast assumes the outbreak is contained by the end of the first quarter, "allowing for the resumption of normal economic activity in second quarter," according to Moody's.
Moody's, which forecasts global GDP growth of 2.4% in 2020, said its outlook for the automotive industry "remains negative." Global vehicle sales dropped 4.6% in 2019, according to the firm.
Moody's said it would consider returning to a stable outlook if it expected global light-vehicle sales to recover to at least 1% over the next 12 to 18 months. That's in addition to the auto industry improving pricing and "at least stable capacity utilization."