By Bloomberg · Oliver Sachgau · BUSINESS, WORLD, US-GLOBAL-MARKETS, EUROPE
Chief Executive Officer Oliver Zipse on Wednesday announced the idling of factories around Europe, while a site in South Africa will also be closed. He delivered the decision after the German carnaker delivered a downbeat financial update, warning that sales will be significantly below 2019 levels and profitability the weakest for some years.
European markets like France have already closed dealerships and other manufacturers including Volkswagen, Daimler, Renault and Peugeot-maker PSA Group have cut production. With other manufacturers including planemaker Airbus idling plants, Europe is facing its biggest industrial shutdown in decades.
That suggests even bigger declines ahead for car sales -- even after passenger registrations slid 7.3% for the first two months of the year, according to the European Automobile Manufacturers Association.
BMW shares declined 7.5% to 37.30 euros as of 10:21 a.m. in Frankfurt, and are trading around 10-year lows.
The ACEA in January predicted a 2% contraction in registrations for the year, but that was before the spread of coronavirus in the region really took off. Countries including Italy and Spain are now hotspots for the pandemic, with economies grinding to a halt. The February drop in car sales totaled 7.2%, the ACEA said.
The ACEA didn't comment on any potential effects the virus could have on 2020 sales, though analysts have been making predictions. Global production is likely to slump 16% for the full year, according to RBC. Automakers face "a landscape of plummeting worldwide demand," Bloomberg Intelligence analysts Kevin Tynan and Michael Dean said in a report this week.
Governments in countries from Germany to Italy and Spain have shut borders, closed restaurants and urged people to shelter to slow the spread of the disease, damaging economic growth. Daimler shares fell 5.6% in Frankfurt after the German company said late Tuesday it will suspend the majority of its production in Europe for an initial period of two weeks.
In addition to shutting production sites in France this week, Renault said two other factories in Morocco would be closed, affecting nearly 11,000 workers. The French company is also idling a Dacia site in southern Romania because of the virus, profit.ro reported, citing unidentified officials from the company.
VW, the world's largest automaker, said it will halt production at its plants in Europe for at least two weeks. The company's main passenger-car unit on Wednesday echoed comments from its parent, saying the business outlook is complicated by uncertainty triggered by the coronavirus crisis.
The brand that accounts for about half of VW's global deliveries will close its European factories for 10 business days.