Automakers in Europe resume production amid uncertain demand

Reuters

German carmaking giant Volkswagen resumed production at its biggest factory on Monday as part of a broader industry drive to get back to work in Europe, where the coronavirus pandemic has hammered demand and pushed up inventory levels.

Encouraged by a fall in infection rates, Germany has eased lockdown rules and automakers are relying on the country’s ability to trace and contain new coronavirus cases to safely restore operations in Europe’s largest economy.

Volkswagen group, which also owns the Skoda, Audi, Bentley, Porsche and Seat brands, is resuming production at its plant in Wolfsburg, Germany, as well as at factories in Portugal, Spain, Russia, South Africa, and the Czech Republic this week.

Production capacity at Wolfsburg will be just 10-15 percent to begin with, and will reach around 40 percent of pre-crisis levels after about a week, Andreas Tostmann, the VW brand’s board member responsible for production, said. “The restart of Europe’s biggest car factory after weeks of standstill is an important symbol for our employees, our dealers, suppliers, the German economy and for Europe,” he said.

Volkswagen’s plans mirror moves by rivals Renault, Peugeot and Fiat Chrysler to revive an industry crippled by dealership lockdowns and supply bottlenecks caused by restrictions to contain the pandemic.

Fiat Chrysler has restarted Italian production at its plant in Atessa, and has begun preparatory work in Cassino, Pomigliano, Termoli, and Mirafiori. Swedish truck maker AB Volvo, whose brands include Mack and Renault trucks, is also looking to restart output, despite saying last week its net orders had turned negative since the end of March.

With dealerships closed in Germany until last week, it is hard for executives to gauge the level of demand. LMC Automotive analysts see an uneven pattern across the globe.

“We assume that light vehicle sales will bottom out in April in Europe and North America, but the recovery, while broadly V-shaped, is unlikely to be rapid in the subsequent months,” they said.

Demand is seen down 20-30 percent for 2020 overall, with China being the only exception, thanks to its ability to impose social restrictions more forcefully than in the rest of the world. But even in China, sales are seen down 12 percent this year, LMC said.

Carmakers have overhauled production methods to try to reassure workers about the safety of returning to the production line.