Moody's on May 13 slashed its global auto sales forecast for 2020 as the economic impact from the coronavirus pandemic worsens.

Moody's expects global auto sales to drop 20% in 2020, down from its previous forecast of a 14% drop. The change is "based on the darkening outlook for the global economy," according to a research note.

Gross domestic product for the leading rich and developing nations of the G-20 is expected to drop 4% in 2020, down from the previous forecast of a drop of 0.5%.

However, the G-20 GDP is expected to grow 4.8% in 2021, with global auto sales projected to rise 11.5%, Moody's said. The recovery is expected to continue after 2021 but at a slower pace.

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Moody's expects mid-to-high single-digit sales growth in 2022 with global auto sales about 85 million to 88 million units, less than 2019 sales levels of 90.2 million units.

Moody's said demand will continue to plummet in Europe, with Western European auto sales expected to drop 30% in 2020. Auto production is resuming in the region, but dealerships remain closed and demand is likely to stay weak, according to Moody's.

European governments are discussing customer incentives, which could cause potential buyers to wait until any discounts are put in place, Moody's said. European auto sales are expected to rise 17.5% in 2021 off a low base.

In the U.S., auto sales projections continue to weaken. Moody's expects sales to plunge 25% in 2020. Light-vehicle sales in April, however, were less severe than expectations as incentives enticed buyers during the pandemic.

As automakers begin to reopen North American plants, Moody's believes that production could be slowed by potential supply chain bottlenecks, including the prolonged shutdown of Mexican parts supplier factories. Moody's expects U.S. auto sales to grow 16.2% in 2021.

China is only major auto market for which Moody's maintained its previous forecast as demand in the country begins to normalize. The firm still expects sales in China to drop 10% during the year.

China's auto sales rebounded to a 4% year-over-year gain in April, signaling a strong comeback, according to Moody's, and auto sales are expected to grow 2.5% in 2021.

Moody's could change its forecast to a stable outlook if global auto sales grow by at least 1% over the next 12 to 18 months.