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How has the current pandemic affected the automobile industry?

by Opinion • August 17, 2020

By Cindy Cummings

The COVID-19 pandemic has had a sweeping impact on the global automotive industry, with Deloitte research revealing that there has been a major disruption in Chinese part exports, the closure of assembly plants in the U.S., and important manufacturing interruptions in Europe. These major industrial shifts represent only the tip of the iceberg, however, with many smaller or auxiliary businesses suffering.

In L.A. county, where COVID-19 trends are slightly improving, there are around 91 companies dealing in the trade – including automotive software, vehicle design, and e-commerce dealers. From car wash companies to those making automotive accessories, businesses are feeling the pinch.

What is the Potential Long-Term Impact of the Pandemic on Car Makers?

A continued interruption in customer demand may spark a global recession, says Deloitte, leading to a loss of consumer confidence and loss of revenues and profits. Automobile makers may be forced to divert capital to survive, reducing their budgets for research and development and putting a stop to advanced technological advancement. Big companies may also decide to exit some global markets and this, coupled with poorer market conditions, may require significant restructuring in many companies.

How Will Smaller Businesses in the Industry be Affected?

As mentioned above, the effect of COVID-19 is likely to trickle down to smaller businesses, including those specializing in truck bed covers, truck covers and other accessories. The majority of businesses in L.A. county actually focus on both technology and accessories that make driving safer, more connected, or more entertaining. As consumers put off the purchase of new vehicles, they also tend to put up with older or less efficient accessories and tech for longer, putting off their purchase to the time when they can afford a new or upgraded vehicle.

What Steps Should the Industry Take?

Businesses wishing to survive this challenging moment in history should identify and quickly adopt cost-cutting measures that have the smallest impact on their revenue. They should also invest in research so as to more accurately predict areas they can invest in, as well as those that should be reducing costs on. They should also look early on into potential sources of collateral, building a borrowing strategy in case liquidity becomes a problem.

Finally, they should prioritize employee safety and wellbeing, as recovery from COVID-19 is predicted to be V-shaped across a plethora of industries. This means that once a solution is found, the automobile industry will require engaged, healthy, motivated workers that are keen to embrace high productivity levels and optimal standards once again. Businesses should additionally look into ways to make consumers feel safe; social distancing measures should be adopted. Customers should be informed of measures being taken to significantly reduce the risk associated with shopping or visiting premises.

As is the case with many other industries, the automobile industry is straining under the weight of the pandemic, with production and purchasing experiencing a severe truncation. Recovery is predicted to be quick once health solutions (e.g. vaccines) are approved and effected. This means that businesses need to prepare by taking care of staff, adopting their markets and investments, and planning for borrowing should the need for it arise.

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Filed Under: Business

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