Asia-Pacific crisis

May Arthapan, Director, Asia Pacific

05 February 2021

Just when you thought it could not get any worse …

While the automotive industry in Asia-Pacific has seen its fair share of disruptions over the years, the health pandemic and its repercussions have, without a doubt, created the most challenging crisis ever endured by the industry.

The Light Vehicle production loss for the region as whole in 2020 is estimated at 5.2 million units, equivalent to 11% of the 2019 volume.

Regional output had been deteriorating, even prior to the pandemic, mainly as a result of a slowdown in the Chinese and Indian markets. The region’s churn rate had already dropped by 6% in 2019. When looking at the 2019-2020 period, Asia is thought to have lost a staggering 8.2 million units of production when compared with the levels achieved in the previous two years. This represents the largest hit to volume the region has ever suffered.

Asia-Pacific is likely to have closed 2020 with total Light Vehicle build of just under 41 million units, marking a decline of 11% year-on-year. Pakistan was hardest hit, with an estimated drop of 37% year-on-year, followed by ASEAN, with a contraction of 30%, and India, with a fall of 23%, as all three markets have struggled to contain the virus outbreak and its impact on economic activity. Not only that but these emerging markets are less equipped to cope with macro shocks. Volume recovery will continue, but the pace of the rebound will be slower, at least in the first quarter of this year, hampered by the shortage of semiconductor chips. We expect regional build to bounce back to 46 million units in 2021, although this would still be 6% lower than the overall production volume in 2018. In fact, regional output is not expected to return to the 2018 level of close to 49 million units until 2022.

On the demand side, Asia-Pacific is set to have ended 2020 with a sales loss in excess of 8%, or 3.5 million units, when compared with the preceding year – and this comes on top of a market contraction of 7% in 2019. For the 2019-2020 period, the region is likely to have lost a total of 6.5 million units in sales, and we do not anticipate a return to the 2018 level until 2023.