Europe LVs

European LV production: time to stop and take stock

Halfway through 2021, how does the landscape look for light vehicle production in Europe? And what can we expect going forward?

James Norris, Senior Analyst, European Light Vehicle Production

24 June 2021

If, like this author, you check automotive-related news on a regular basis, the flurry of updates on topics like COVID-19 and, more recently, the semiconductor shortage can become overwhelming. The changing environment impacts car production in the region, but the extent of that impact can often be lost among the frequent and piecemeal reports and announcements. It therefore seems reasonable to take stock of European Light Vehicle production now that we are almost midway through 2021.

Analysis of the chart below should help to provide context on the situation, by comparing the first five months of the current year with volumes in 2019 and 2020. Both years are equally important, with 2019 providing the basis for a ‘normal’ year, and 2020 highlighting the dramatic contraction in production after the initial breakout of COVID-19 in Europe, followed by the improvements after April of that year.

Source: LMC Automotive European Light Vehicle Production Forecast

As illustrated, the first three months of 2020 show a production decline of 18% compared with the same period of 2019 – the cause of this is already well documented. However, in a way, the results for 2021 are even more interesting with a drop on the 2019 production figure of 18%. Clearly, the 2021 numbers are being influenced by the continuing impact of the pandemic on demand, but it is now the chip shortage which has come to the fore. This loss to production has intensified over the second quarter – demonstrated by the widening gaps between 2019 and 2021 volumes from March onwards – with build from January-May this year dropping by 20% when compared with 2019. Although substantial, it should be noted that this is still only half as deep as seen over the same period in 2020 (-42% YoY).

Despite a tumultuous start to 2021, we expect the slow recovery to pre-pandemic levels to resume over the second half of the year as disruptions from the chip shortage begin to fade, after peaking in Q2. Alongside this, and perhaps more importantly, demand should improve as lockdown measures ease following the continued rollout of vaccines. As such, European Light Vehicle production is predicted to fall by 9% in 2021 from the 2019 level, a vast improvement on the fall between 2019 and 2020.