Global auto sector to contract 4.5% this year as recovery drifts - BASF CEO

Global automotive sector woes are not expected to recede until 2020, BASF CEO Martin Brudermuller said on Thursday, projecting a global decline for the sector of 4.5% this year.

A collapse in automotive sector demand and production had been expected to rebound in the second half of 2019 but, with economic indicators growing progressively weaker rather than stronger as the year goes on, a fast recovery is looking increasingly unlikely, according to Brudermuller.

“The automotive industry – an important customer industry for BASF – will not recover this year,” he said, speaking at a press conference following the publication of the Germany-headquartered chemicals producer’s second-quarter results.

Weak automotive sector demand was one of the key weights on company performance during the first half of 2019, alongside negative North American agricultural demand and cracker turnarounds reducing ethylene chain product margins.

The sector’s prolonged lethargy has been exacerbated by the US-China trade war, which Brudermuller predicted would also become more entrenched over time, with odds of a resolution this year becoming longer with each passing day.

The BASF CEO criticised the US approach to negotiations, stating that he had heard from China parties that the country had “broken every red line”, along with its measures against telecoms group Huawei injuring Chinese national pride and increasing odds that the Ji Xinping’s administration would dig in its heels.

“[China is] preparing itself for a longer period where it stays where it is today, [which is a] big obstacle,” he said.

The European Automobile Manufacturers' Association (ACEA) last month shifted its projections for EU demand for 2019 to a 1% decline.