The production plants of automotive and their suppliers are gradually resuming to come back online all around the world. Entering this post-quarantine phase, it is hard to assess what is left in the stores for automotive in the remaining 2020. Broadly speaking, automotive vertical majorly comprises OEMs (Original Equipment Manufacturers), vendors, auto-ancillary companies, and major other spare parts dealers. The automotive market before the COVID-19 outbreak was witnessing a modest growth due to the constant novel technological introductions and human robot collaborations in its manufacturing. But the viral outbreak has disturbed this growth curve of the industry as the production in plants have come to a halt.
As a result of the pandemic on the automotive sales, IHS Markit and LMC Automotive, the leading exclusively automotive focused provider of automotive forecasting have made the sales prediction in a range of 69.6 to 71 million units. This estimation recorded a sweeping fall from their pre COVID-19 projections which was near to 90 million units. Further, LMC stated that no sooner than 2023 or 2024 the global auto industry is about to return to its pre-pandemic production levels. These projections are backed by the rate of unemployment evident through the filing of unemployment benefits by 1 in every 4 working American during the pandemic and the reducing consumer sentiment (U-M Index of Consumer Sentiment fell by -26.3% YOY).
Autonomous and electric vehicles are particularly struck. The cost reduction of current strategies for all companies both inside and outside the automotive industry slows research and development. In a recent survey by IHS Markit on the automotive research and development impact of COVID-19, 54% of respondents indicated delay in deploying technology as a major impact, and e-mobility technology had the biggest impact, according to 22% of respondents. In the short term, automakers are expected to delay capital-intensive efforts on autonomous, shared, and electrical technologies to prioritize resources for immediate product launch and profitable core business resumption.
Owing to parts supply shortages from Mexico, General Motors at its 2 major truck plants in Flint, Michigan and Fort Wayne, Indiana had to postpone the addition of its 2nd shift. The automotive supply chain’s scope and extent pose more challenges. As Dietmar Ostermann, US automotive advisory leader at PwC states “I know that, certainly, the larger Mexican suppliers and the facilities of larger U.S. and European and Japanese suppliers in Mexico will implement the same safety standards. But I am very doubtful that smaller Mexican supply plants and Tier 2 supply plants will have the safety processes and testing capabilities in place.” Thus, it will be tough for the industry to recover from the financial stress caused by the outbreak of COVID-19.
