Experts and analysts say the coronavirus pandemic has crippled the global economy worse than the Second World War did. In the 1930s, many countries around the world spent months to years ramping up production in essential areas, stockpiling supplies, and preparing for war. Even with the preparation, though, people around the world found their lives and livelihoods torn apart throughout the years-long war. In contrast, the coronavirus pandemic has transformed life for billions of people in a matter of a few months. As the virus traveled from Asia to Europe and to the Americas, it severely impacted everything in its path. The ripples it has created will remain for several months across all industries.
Putting the brakes on production:
The coronavirus pandemic has turned the auto industry upside down. Analysts predicted a productive 2020 before the COVID-19 pandemic. The first 10 weeks of 2020 were great for the industry. But auto factory shutdowns that began in the middle of March are now likely going to last longer than expected.
Ford is delaying the restart of all the North American plants due to concerns over the health of workers and said the temporary suspension of vehicle and engine production at most of its European manufacturing sites is now expected to run at least until May 4. Nissan’s British factory, the country’s biggest car plant, is suspended through April, and its manufacturing facilities in North America also remain closed. Renault has closed all its plants worldwide, with the exception of those in China and South Korea. Fiat Chrysler said plants across the United States and Canada, as well as headquarters operations and construction projects, would remain closed until May 4.
Dismal auto sales in March:
In March, regional car sales, as described by MarkLines Automotive Industry Portal and the automotive industry analyst site, Just-Auto, showed a steep decline ranging from 9.2% to 85.4%. Presented below sums up these declines in various countries and regions
A red light for launches:
COVID-19 is ruining the timing for the rollout of new models. Experts say market launches will be impacted throughout the year. Three freshened 2021 Chevrolet models are now delayed due to the crisis: the Equinox, Traverse, and Bolt EV. Those programs will now shift to the 2022 model year. Launches of Polestar-2, 2020 Nissan Sentra, Corvette, Atlas Cross Sport, and more will be put on hold as automakers rethink new go-to-market strategies.
The on-air advertising campaigns for the new models are now put on hold as well. Advertising funds spent could alter the financial balance of the companies. Also, as the pandemic has created financial imbalance for many customers, there is a strong possibility of the decrease in sales continuing into 2021.
Production acceleration for aid:
Automakers have pledged to help out with manufacturing healthcare equipment to fight the COVID-19 public health crisis. In collaboration with GE Healthcare, Ford has planned to restart its Rawsonville components plant for the production of FDA-approved ventilators. Ford has also announced that production will quickly scale up to produce 50,000 ventilators within 100 days to help meet the growing demand in the United States. General Motors has collaborated with Ventec Life Systems to increase the production of Ventec’s respiratory products to support the growing fight against the pandemic. Daimler says its 3D printers in use at Mercedes Benz have been turned over for the production of medical equipment. And VW group SEAT has started production of emergency ventilators at it’s Martorell facilities to contribute to addressing the crisis caused by COVID-19.
Fiat Chrysler is in the process of converting its plants to produce face masks for donation to first responders and healthcare workers. Interior fittings supplier Wrapping Solutions is partnering with Optima to produce up to 24,000 facemasks per day in a two-shift operation in Germany. General Motors is also increasing production capacity of facemasks (50,000 masks per day) at its Warren, Michigan, facility due to the overwhelming number of requests. To assist medical workers fighting COVID-19 in its local communities, Nexteer Automotive is using its 3D printers in Saginaw, Michigan, and Tychy, Poland, to make plastic masks and face shield headbands.
Caution: Parts shortage ahead!
A press release by J.D Power, an American data analytics and consumer intelligence company, has reported that the coronavirus pandemic’s effects may cause a severe parts shortage. It has the potential to negatively affect customer satisfaction, which had previously been increasing over the past several years.
As Chris Sutton, vice president of the US automotive retail practice at J.D. Power, describes, “Automakers and dealers need to prioritize securing sources for their parts supplies or face the consequences of losing business. Customers will be initially understanding of coronavirus consequences, but shortages will continue well beyond the current public health crisis. Customers will not understand in August, for example, why there are no parts to repair their vehicles.”
The pandemic poses the biggest threat to the auto industry since the Great Recession, which helped plunge GM and Chrysler into bankruptcy. Major automakers including Hyundai, Ford, Nissan, and GM are offering new car buyers delayed payments and rescheduling amid the coronavirus pandemic.
Hyundai is reviving it’s Hyundai Assurance Job Loss Protection Program. The program helped Hyundai gain market share on its competitors despite the automotive industry’s sales crisis during the Great Recession. A similar approach has been introduced by Ford. The Built to Lend a Hand program allows eligible new car customers to defer payments for up to three months and the automaker will pay for three months, providing up to six months of payment relief.
Breakdowns in China:
China, the world’s biggest auto market, has been hit the worst by the coronavirus outbreak. Statements released by the China Passenger Car Association (CPCA) depict a clear picture of car sales in China: As the pandemic spread across the country, retail sales of passenger cars crumbled 92% in the first ten days of February compared to 2019. Overall sales for the month dropped 80%, which is expected to be the steepest drop of the year.
Japanese automaker Toyota has reported its February sales in China, with a 70% decrease in sales from February 2019. However, Tesla actually saw an increase in sales from January to February, from 2,620 vehicles sold in January to 3,900 vehicles sold in February. Tesla’s sales hit a record high in March, with 10,160 vehicles, its highest ever monthly sales in China.
China begins repairs to restart production:
The latest reports indicate that the industry is slowly equilibrating to a new normal as Chinese citizens are being released from isolation. Beginning the month of March with a drop in sales of 80% from 2019, the passenger car sales market has begun to recover, rising to only a 47% reduction from 2019 numbers by March 15. This sales transition boosts the confidence of the industry.
Just-auto.com has reported that dealers are advertising digital vehicle sales in China, which is a few months ahead of the Western world in the course of the outbreak. Geely, one of the country’s largest automakers, has already launched a no-contact car-buying service, where the vehicle is delivered to the customer, disinfected, and then the keys are sent separately via drone. Virtual tours of the vehicles and negotiations over video calling services will boost the sales.
Hope for new routes:
The February collapse of vehicle sales in China, where the pandemic originated, could be an indication of the extent of damage ahead for US manufacturers. Analysts are hoping for a fourth-quarter bounce back, as stay-at-home orders will have lifted. But without a vaccine to prevent further outbreaks, an economic recovery is far from assured. In light of the extent of the pandemic, the automotive industry has a long road ahead to full recovery!
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