The coronavirus pandemic wreaked havoc and generated economic hardship all over the world. No country has been spared the virus’s effects and economic consequences, from Asia to Europe to North America.
Similarly, the pandemic has impacted practically every industry, and the globally integrated automotive industry is no exception. Factory closures, supply chain disruptions, and decreased demand have all had an impact.
The pandemic’s influence on people’s employment, travel, and day-to-day life, on the other hand, has had a knock-on effect, radically altering consumer patterns and behaviors. Naturally, this has impacted automotive manufacturers, dealers, financiers, and a variety of other associated industries.
Four Major Challenges Faced By Automotive Industry
Let’s discuss the challenges faced by the automotive industry during the COVID-19 crisis.
Short Supply of Vehicle Parts And Other Equipment
Starting in China, suppliers all around the world quarantined or shut down production lines completely.
In addition, legal and trade constraints such as closed borders exacerbated the shortage of essential parts and restricted supply distribution.
This shortage also led to increased prices of equipment like automotive lifts for car alignments, wheel balancers, and tire changers.
Manufacturing Was Halted
Original Equipment Manufacturers (OEMs) were forced to shut down production due to a lack of parts and a just-in-time production method, as well as quarantine measures and a decreased workforce.
The necessity to ensure liquidity and control overproduction as a result of lower sales adds to this.
The drop in demand resulted in a decrease in cash inflow, even though short-term commitments and salaries must still be paid. Within a few months, cash reserves depleted and the working capital declined.
Decline In Sales
Politically imposed measures to contain the virus, such as enforcing curfews, closing factories, offices, and dealerships, and the subsequent layoffs of part-time workers, as well as the fear of a recession, resulted in dropped sales of new vehicles.
Before the pandemic, it was predicted that global car sales would exceed 80 million. As the global economy slowed and the coronavirus pandemic spread across all major economies the sector saw a decreasing trend and car sales went down to 63.8 million units in 2020.
The Rebound Of Automotive Industry
Vehicle sales continued to climb approaching pre-COVID-19 levels as the economy gradually revived during the summer after a near-shutdown in the spring.
In July 2020, the number of new and used automobile transactions rebounded to levels seen before the widespread outbreak in the United States in January and February. Used vehicle sales, in particular, have risen strongly, with July sales only 4% lower than a year earlier. However, the number of new autos sold fell by 17%. The overall recovery has been aided by several reasons.
Many vital workers turned away from ride-sharing and public transportation to avoid infection, since having a personal vehicle became one of the safest methods to get around in a pandemic. Even though many office workers now telecommute, a recent study suggests that individuals in large cities may wish to take short vacations or relocate to less-populated locations to avoid viral hotspots.
Furthermore, many people believe that having a car is less expensive now than it was previously, as a result of technological advancements.
Strategies To Incorporate For Future Success
Automotive companies should take the following steps to overcome these difficulties as they restructure their businesses and industries from the inside out. Use key strategic initiatives to balance the need to run a profitable business while exploring new innovations and business models:
- Vehicle dealers and manufacturers should develop innovative ways to interact directly with customers.
- Businesses should make a name in an industry that is constantly changing and becoming more connected.
- The future will be defined by new business models such as pay-per-use and subscription-based mobility.
- Automotive companies must learn how to get the most out of digital marketing.
- Companies must design and produce vehicles that are increasingly sophisticated and networked to satisfy the changing mobility scenario.
- From the assembly line to the back office, automotive businesses should rethink operations.
- Because the skills that automotive firms require are rapidly evolving, employers must rethink how they hire, retain, re-skill, and retire their employees.
In today’s digital age, innovation must become ingrained in every department and discipline, allowing the entire organization to contribute to improved results. While new technological breakthroughs may make some automakers feel behind the times, there are numerous opportunities available.
Companies that can successfully identify which technology investments are strategic to their short- and long-term competitiveness while also producing the highest and most long-term profits will be the most future-proof.