While the novel coronavirus (COVID-19) pandemic has upended the global automotive market during the past 12 months, the commercial-vehicle (CV) segment proved relatively less vulnerable than other sectors.
The Economist Intelligence Unit (EIU) estimates that worldwide CV sales declined by 15.7% year-on-year to 23.1 million units in 2020, recording a more robust performance than the passenger car market, which is likely to have contracted by 18.2%. In some cases, the EIU’s CV sales data also includes vans, pick-ups and buses, but it is clear that trucks were the biggest growth drivers in an otherwise calamitous 2020.
The primary reasons behind the truck segment’s strong performance were low interest rates, attractive financing deals and higher government-led infrastructure spending in China. The EIU estimates that truck sales in the Asian behemoth boomed by close to 20% year-on-year to 5.2 million units between January and December 2020. The base for comparison in 2019 was smaller, but only by 1.1%, since that was the recorded decline amid a weaker economy. The factors that spurred truck sales in China in 2020 are likely to continue playing out in 2021, posting another stellar year of growth at 8.5%.
Elsewhere in the world, COVID-19 hit the truck market harder than in China. Sales plummeted by an average of more than 40% and thousands of job losses were planned, especially in Europe. Ola Kallenius, Chief Executive of Daimler, the world’s largest CV maker, said in July 2020 that the “significantly harsher reality” the market faces owing to COVID-19 will necessitate “drastic” salary cuts to protect corporate balance sheets and safeguard investment. Sweden’s Scania—part of Germany’s Volkswagen Group—laid off 5,000 workers, and Volvo Group, also a Swedish truckmaker, cut 4,100 jobs during the second half of the year.
The EIU does not believe that all the lost jobs in 2020 will return in 2021, owing to lower post-pandemic production. This will result in a jobless recovery, and depress disposable personal incomes and spending. Higher unemployment in other sectors across the global economy will have the same effect. Therefore, corporate investment to acquire smaller trucks to ferry consumer goods will also fall next year. Subdued infrastructure spending in Europe will further dampen demand for larger trucks.
Meanwhile, the decline in heavy-duty CV sales measured an estimated 14.7% year-on-year in the US, owing to a halt in construction projects, manufacturing disruptions and most importantly the uncertainty stemming from the US presidential election. Next year, US truck sales are forecast to recover by a strong 30% and exceed their 2019 levels by a comfortable margin; this comes on the back of policy stability stemming from Joe Biden’s White House, and his evidence-based plans to bring COVID-19 under control and “build back better”.
On a global scale, CV sales in 2021 are likely to witness a faster growth rate than that for passenger cars; this segment should bounce back by 16% to 26.9 million units.
Next year, The EIU also expects new corporate partnerships and an expansion in existing alliances such as those between Daimler and China’s Geely, and Volkswagen and Ford. Truckmakers will increasingly look to protect their existing investments and split the cost of developing new technology, especially as governments look to make a “green” recovery from the COVID crisis. Despite some investment in and development of self-driving trucks, the focus will stay away from the technology until corporate balance sheets are in better shape. Ultimately, it seems reasonable to suggest that the global truck market will never be the same.
Arushi Kotecha is a Research Analyst at The Economist Intelligence Unit