US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

Ambitious Osram Continental JV Among the Latest Casualties of the COVID-19 Pandemic

What started in 2018 as a strong joint venture between two successful companies in their traditional markets is scheduled to end in 2020.

Osram Continental was formed to take advantage of the rapid transition of motor vehicle lighting to LED-based fixtures by offering semiconductor-based lighting products. The long-term goal of the JV was not just to manufacture efficient LED vehicle lights, but also to connect the lighting to other vehicle systems to make travelling safer for the occupant and for other vehicles on the road.

Despite the rapid transition to LED-based vehicle lights, global motor vehicle production has stalled. According to Freedonia analysts, global motor vehicle production declined slightly in both 2018 and 2019 before sharply contracting in 2020 due to COVID-19 pandemic. This is the same length of time that Osram Continental has been active, and it has not provided the company with a strong market environment in which to launch. Currently, Continental doesn’t expect global vehicle production to return to 2017 levels until 2025 (Freedonia estimates have production returning to 2017 levels in 2023). Either way, the recovery is looking long. Securing contracts with motor vehicle OEMs is critical to Osram Continental’s success, and the recent weak performance and slow expected rebound have dealt a severe blow to the profitability of the venture.

All is not lost, however. The two companies are committed to continuing their development of automotive lighting products through a future cooperative agreement.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including our soon-to-be-released Global Motor Vehicle Outlook update as well as several Freedonia Focus reports (Motor Vehicles: United States, Hybrid & Electric Light Vehicles: United States, and Motor Vehicle Leasing: United States. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Consumer Goods      Covid-19      Machinery & Equipment    

Fewer Planes in Service & Fewer Miles Flown, But More Used Parts on the Market Hits Aerospace Component Suppliers

New parts suppliers to the airline industry are getting hit with a double whammy this year. Not only are planes being flown less and therefore need less routine maintenance and part replacement, there is also increased competition from used parts. As airlines are accelerating the retirement schedule of their fleet due to reduced need, an increasing number of planes are being dismantled and sold for parts.

As this increasing supply of used parts appears on the market, downward pricing pressure will result. Some expect as many as 2,000 aircraft will be retired in 2020, more than double the 2019 level (which was only 680). However, not all these planes will be immediately dismantled and sold for parts; some carriers will choose to wait until the market improves and prices tick back up.

Even aerospace components that are not subject to the competition from used parts – including industrial fasteners, turbines, gaskets, seals, adhesives, and bearings – will see reduced sales from fewer miles flown and fewer planes in use, including industrial fasteners, turbines, gaskets, seals, adhesives, and bearings.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Global Adhesives & Sealants, Adhesives & Sealants, Global Turbines, Global Bearings, Global Gaskets & Seals, Gaskets & Seals, Industrial Fasteners, Global Industrial Fasteners, and Freedonia Focus Civil Aircraft: United States. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Covid-19      Industrial Components    

The Pandemic Reduced New Car Sales, but Renewed Emphasis on Private Ownership & the Importance of Cars in Americans’ Daily Lives

Motor vehicles have offered us the ability to safely distance yet stay engaged with our communities and loved ones during the pandemic. Large gatherings like birthday or graduation parties have largely been put on hold, but that has led to creative ways to still celebrate these milestones with drive-by parades. If for some reason birthday parties aren’t your thing, you can also use your car to attend religious services or to see a movie or concert. During a time when many of us are limiting our trips away from home and maintaining social distance when we are out, vehicles have become not only a way to get from point A to point B, but also a church pew, a theater seat, and a picnic site.

Additionally, a growing number of people who had been public transit devotees have reverted to private vehicle ownership. With heighten hygiene concerns and the fact that COVID-19 is an airborne disease that spreads most easily in poorly ventilated areas where people are in close proximity, some see cars as a safer commuting and travel option in a pandemic world.

Yet the increased dependence on vehicles in 2020 runs counter to declining vehicle ownership rates many thought would be the result of the sharing economy. So what does this mean for the future of motor vehicle sales? Automakers, in general, are assuming that the underlying trends and consumer preferences for vehicles and how we use them aren’t going to change all that much. In fact, although Uber’s ridership was down 75% between April and June, Uber Eats’ bookings were up significantly. Grocery deliver services have also fared well during the pandemic. It’s less that people have abandoned the sharing economy; instead they have reprioritized it to fit the current environment.

What about personal vehicle ownership? It’s no surprise that sales of new vehicles are down this year. The shutdown of many auto plants during the early part of the pandemic has hurt new vehicle inventory. Reduced disposable income also meant that many consumers opted for purchasing preowned vehicles. While there was an initial fear that consumers would choose to hold onto their vehicles longer and that used car inventories would dry up, that doesn’t appear to be the case. Because of the shortage of new vehicles dealers are actually paying more to acquire used cars to keep their inventory up.

All this leads to a complicated and changing picture for the motor vehicle industry and how cars fit into our daily life going forward.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research including the soon-to-be-published Global Motor Vehicle Outlook, as well as Global Motorcycles, Global Buses, and Global Foodservice. Related Focus reports include Motor Vehicles: United States, Hybrid & Electric Light Vehicles: United States, Bicycles: United States, and Global Medium- & Heavy-Duty Trucks & Buses. Other related titles available from Packaged Facts’ food- and beverage-related reports, including Food Carryout & Delivery as well as the companion report with timely consumer insights from our in-house survey capabilities. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Covid-19    

Booming RV Industry Benefits Supplier Industries Too

The recreational vehicle industry is booming as Americans look for ways to vacation while limiting potential COVID infection points such as hotels, restaurants, and public restrooms. An investment like this has become increasingly attractive to the many travelers who are unsure they will ever be taking long trips packed with other travelers into a train, a bus, or an airplane or at least not for the foreseeable future.

Families are also using these as places to work remotely or as a classroom space for children who are not yet able to join a conventional classroom setting.

Others are finding the open road to be an attractive place to work. This trend, which had already been underway, is expanding as many white collar workers are now untethered from the conventional office space due to the pandemic and many offices are expecting to have generous work-from-home plans for the next year or beyond.

So beyond the RV manufacturers and vendors, themselves, who else also benefits from this boom?

  • Vehicle companies that make the base chassis of converted vans and motorhomes
  • Suppliers of engines and electric power generators as well as tires and other vehicle components
  • Suppliers of construction elements such as cabinets, countertops, flooring, plumbing fixtures and fittings, small sizes of kitchen appliances, lighting fixtures, and coated fabrics for awnings, pop-up tent components, and all-weather upholstery
  • Suppliers of creature comforts such as consumer electronics and furniture, from couches and tables to beds
  • Suppliers of outdoor recreation products – e.g., grills, outdoor chairs & tables, motorcycles – which are used along with recreational vehicles

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in Construction and Building Products and with reports such as Outdoor Furniture & Grills, Global Motorcycles, Global Diesel Engines, Global Buses, General Purpose Lighting Fixtures, and Recreational Vehicles. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


COVID-19 Pandemic & Rise of Electric Vehicles Continue to Affect Refining Industry

Like many other segments of the economy, petroleum refiners have been severely affected by the COVID-19 pandemic. Steep declines in air travel have caused demand for highly profitable jet fuels to plummet, while US consumers – many of whom now have zero-mile commutes – use far less gasoline. Thus, refiners – like downstream producers and other petroleum industry participants – have seen declines in profitability.

A recent article showcased the difficulties faced by the refining sector. While demand for gasoline and some other petroleum products has largely rebounded as shelter-in-place orders have been lifted, jet fuel use remains low, causing refiners to move to keep facilities closed or to operate at lower capacities, further affecting their profitability.

Furthermore, another threat looms on the horizon: the potential of the electric vehicle, which largely obviate the need for gasoline. While many are familiar with Tesla, a number of other firms are looking to enter the electric vehicle market. Monday’s announcement that Lordstown Motor Company – a firm dedicated to the manufacture of electric pickup trucks – would be going public as part of a reverse merger, demonstrated the continuing interest in electric vehicles. The more widespread introduction of electric-powered trucks and automobiles would cause severe disruptions to refiners, as a key end use for their products would slowly shrink. While packaging has boosted the fortunes of many refiners due to heightened interest in single-use plastics, this, too is not expected to last, especially once the COVID-19 pandemic passes.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the COVID-19 with a comparison to historical recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Chemicals      Covid-19      Energy & Petroleum      Machinery & Equipment