COVID-19’s effect on the automotive industry so far (May 2020)

COVID-19. A matter not for the faint hearted, and certainly one that’s dealt a heavy blow to a world that had only just recovered from Liam Payne’s offensive 2019 release ‘Both Ways’. And the automobile industry has had to really dig deep and think out of the box to deal with a crumbling economy. Today, we’re looking at COVID-19’s effect on the automotive industry so far.

COVID-19’s effect on the automotive industry – the bad

Disrupted supply chains

More than 80 per cent of the world’s auto supply chain is connected to China. Which means disruptions in these supply chains has had a massive negative impact on global automakers.

The closure of most production plants, especially in regions like Hubei, demarcated the months of January and February, bringing sales down to zilch.

This is not considering the fact that February usually isn’t a good month for China, where sales and manufacturing are concerned, what with most people celebrating the Chinese New Year (those dragons are SO cool).

And it’s not just China, but Italy too, two of the places the virus hit worst in its first couple of months on the ascent.

Reduced demand and poor car sales

With COVID-19 came the imposition of lockdowns and curfews to try and curb the spread of the virus.

With fewer people heading out, naturally the demand for cars has gone down. Many automakers have reported a sharp decline in sales, with a few companies under threat of going bust.

Conversely, some reports are saying that because people don’t like to take public transport (where cities have reopened), they’ve actually dipped into the automotive market to try and secure a new ride. Because let’s face it, nobody wants to be sneezed on at this precarious time.

Delay of 2021 car models

Put it this way, a lot of what goes into carmaking comes from different places. You could have a little, tiny bolt that’s made in a remote part of Nepal, without which the show can’t go on, and deadlines are pushed back.

What this means is that 2021 models are likely to be delayed. When to? That all depends on how long it takes to contain the virus.

Still, that hasn’t stopped Jaguar from going ahead with the planned release of its 2021 Jaguar Land Rover as scheduled next year.

COVID-19’s effect on the automotive industry – the good

Resumption of production lines

There is definitely light at the end of the tunnel, though, with companies including Toyota, Volkswagen, Ford, Nissan and Mercedes resuming production, as some areas have managed to slow the spread of COVID-19.

In fact, KPMG have said that with China’s economy slowly recovering, starting in April, automotive companies can get up to speed with their latest models. We may even see a little boom as local governments will support local markets with subsidies.

Car companies offering incentives to customers

One way a lot of companies have dealt with the economic collapse is to offer certain benefits to their valued customers.

Here are a few notables so far:

• Audi, Kia and Hyundai offering extended warranties for limited periods of time
• Michelin looks at an alternative revenue stream with the production of face masks and visors
• Audi has opened an online showroom for customers in Saudi Arabia and Abu Dhabi, and are also giving virtual tours of their design lab in Ingolstadt
• Some companies like Audi and Cadillac have taken the philanthropic road, donating vehicles to key service workers
• Formule E kept fans entertained with simulated races
• Mercedes and Chevrolet are giving you the chance to save big(ly) with some delicious Ramadan deals

Well, things are looking up, people are getting used to a new normal (where handshakes don’t exist and ‘how’s the social distancing?’ a common greeting), and there’s cause for optimism in the automotive industry and beyond.

And there you have it. COVID-19’s effect on the automotive industry so far.

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