[Auto]The full warehouses of new and used cars, problem before pandemic and after

[Ale X Erfan]

Even after the previous crisis in 2008, the full warehouses of used cars were emptied over time by lowering prices.

After that, in the following years, their value jumped significantly due to, according to Forbes, a shortage in the market. This magazine predicts that a similar situation could happen again after the pandemic because due to the uncertain economic situation, a part of the citizens will be more inclined to buy a used car than a new one.

Full warehouses

Volkswagen started production at the end of April after a several-week break due to the coronavirus pandemic. And now the company is taking a break again in order to harmonize production with the expected changes in the market, said the official in charge of personnel, Arne Maiswinkel, on the company’s website.

The temporary closures show the difficulties Europe is facing in restarting its economy following pandemic-related restrictions, which have already led to historic declines in European car sales in March and April.

“Customers are not interested in buying cars and the warehouses where the manufactured cars are kept are already almost full,” company official Bernd Osterloh warned at the end of April. He added that the orders that are arriving are desperate.

The various benefits offered by car dealerships, such as zero interest and extension of the repayment period, do not help either.

“Car manufacturers have responded quickly to the coronavirus crisis with attractive offers, but potential buyers have not responded,” Jessica Caldwell, executive director of consulting firm Edmunds, told Bloomberg.

“Consumers are understandably focused on information that changes from hour to hour as well as changes in their daily lives,” Caldwell added.

A 20 percent drop in 2020

Credit rating agency Moody’s has lowered its forecasts for the world car market, and now expects a drop in world sales of 20 percent in 2020, of which 30 percent in Europe and 25 percent in the United States. The Chinese market should fare better, with a 10 percent drop in sales.

The factory in Volksburg should produce about 6,000 vehicles a week in the first place, which is 40 percent of its capacity, while in Europe, Volkswagen factories currently operate with a maximum capacity between 35 and 50 percent.

A “flexible approach” will be needed over a long period of time, Meiswinkel said, at a time when 35,000 workers of that group are still registered as partially unemployed in Germany, reports AP.

One way to boost the auto industry is to reduce the tax burden. Thus, Ferdinand Dudenhöffer, a professor at the University of St. Gallen in Switzerland, told Politico that the European Commission should halve the value-added tax (VAT).

“The demand for high-quality goods must be crucial because that is the only thing that can save the car industry,” Dudenhofer said, adding that the new investments will contribute little to preserving jobs if there are no car sales at the former level.

The crisis in the car industry even before the pandemic

The car industry began to slow down even before the pandemic. Thus, in the European Union, it took almost a decade to achieve car sales before the 2008 crisis, and in the United States five years, according to the New York Times.

However, since 2015, there has been no increase in purchases, and in 2019, according to the website Arstehnika, it fell by 1.3 percent compared to the previous year due to negative trends in the global economy.