EU inventories

Arthur Maher, Director of Research

26 April 2021

European inventories are looking healthy

While inventory figures are not publicly available in Europe, recent events have highlighted that stock movements are a critical component when it comes to understanding the likely evolution of production volumes.

Following the Lehman Brothers collapse in 2008, OEMs were immediately faced with crashing market volumes. They responded by slashing output to minimise unplanned or unrequired stocks. But the scale of the crisis was such that this response proved to be too slow, leaving European OEMs sitting on circa one million Light Vehicles by the close of 2008, all of which were stuck in the supply chain and surplus to requirements.

More recently, with the outbreak of the COVID-19 pandemic and the ensuing lockdowns, European OEMs saw days’ supply rocket to over 115 days in the first quarter of last year. An ideal level for European days’ supply is around 60 days, meaning that the region was overstocked by 55 days.

European Light Vehicle inventory assessment – group level

As shown above, however, European inventories are now generally in good shape, despite the multiple shocks suffered by the global economy.

“European days’ supply is estimated at 60 days for Q1 – an excellent outcome”

From 72 days at the close of last year, days’ supply fell back sharply in Q1 2021, to 60 days, effectively returning to the benchmark. While we show days’ supply edging up to 66 days in Q2, we have it dropping back to its benchmark, once again, in Q3, which bodes well for the industry as a whole.

With that being said, some subtle differences have emerged at the OEM level.

European days’ supply – stock assessment

Daimler Group’s output has suffered from the semiconductor shortage, leaving inventory holdings below par in Q1, at 55 days. However, we expect the group to recover quickly to its benchmark holdings of 60 days.

Similarly, Ford has been hit hard by the chip shortage, announcing widespread output suspensions and reduced shift patterns across its European manufacturing footprint. Mixed in with this disruption is the impact of weakening demand for its models, especially from the group’s key European markets of the UK, Spain and Germany. While Ford’s inventory holdings look a tad light, we expect this to improve during the course of the second quarter.

BMW reportedly remains relatively unscathed by the semiconductor shortage. Group days’ supply currently looks in good shape, at 60 days, but we show this moving up to 65 days in Q2, so it is worth keeping a close eye on BMW. And we have similar concerns for Stellantis.

All told, European inventories show that firm inventory control remains the order of the day.