The effect of COVID-19 surfaced at every production stage of the automobile, starting from the factory and continuing through the showroom and into the workshops. The continuously rising demand for automobiles has not been met with an adequate supply of either new or used vehicles.
Although it will take some time before the full effects of COVID-19 on the automotive industry are understood, the immediate impact on key players in the industry, such as automakers, sales professionals, drivers, and repair workshops, is becoming apparent, and it is not all positive.
COVID-19’s Effects on the Auto Industry
Effects on Supply
Automobile parts like air brakes, frames, filters, hoods, and universal roof racks are a few examples of the numerous foreign components and accessories that fall short in supply that are widely used in automobiles. There have been claims of delays and cancellations of shipments across the globe as a direct consequence of the government’s decision to shut down the nation and limit access to its borders. Manufacturing automobiles is an impossible task without ready access to the necessary components.
The experts agree that this ongoing problem will not go away after the quarantine period is through. This problem will affect the auto industry for a very long period since it will restrict imports and exports and will take some time to develop components to keep up with the demand curve.
Effect on Production
Maintaining a productive work environment in the automotive industry is challenging due to the impacts of social isolation and lockdown, which have inhibited communication and movement.
You won’t be successful with only 99.99% of the system’s components; you’ll need the whole strength of the system. In addition, production is now unable to occur since there is an insufficient supply of the required components for the manufacturer.
Even if businesses are successful in meeting the need for specificity, the demand in the market for new vehicles will not be high enough to warrant the construction of new automobiles. As a result, all industrial operations may be suspended significantly.
Effects on Employment
Several companies, including Volkswagen and Honda, have published studies documenting the tremendous losses their companies have incurred as a direct consequence of temporarily being forced to shut down their manufacturing plants.
Volkswagen estimates that as a direct result of the pandemic, the company would suffer a weekly loss of US$2.2 bln in revenue. Because of these losses, businesses will be forced to reduce their workforces, resulting in a significant lack of available workers.
The massive financial reserves that significant companies have on hand enable them to ride out the storms of the economy. Still, the smaller suppliers that large organisations rely on will not do as well in this environment.
Considering the present status of the economy, if the lockdown is allowed to continue for more than two weeks, a sizeable portion of these suppliers may be forced to call it quits and cease all of their business activities. The landscape of available jobs will become much more unstable due to this new development.
Effect on Demand
It has come to everyone’s attention that favourable economic conditions are required to rise the demand for automobiles. The current state of the economy has dealt a blow that could prove fatal to the demand curves of the automotive sector.
People are losing their jobs and seeing their salaries decrease as a direct consequence of the economy’s continued decline. This, in turn, reduces the amount of money they are required to spend on automobiles and other items of a similar nature. COVID-19 may be responsible for a significant portion of the steep decline that has taken place in the automotive industry.
Effect on Electric Vehicles
It has been hypothesised that the automotive sector might undergo a paradigm change due to the introduction of electric vehicles. EV’s are the future of the automobile industry in terms of efficiency, ecology, and the ever-increasing cost of oil, which is a factor in their widespread use. On the other hand, considering the current state of events, there is a potential that the introduction of electric vehicles will be significantly delayed.
There is a little premium attached to the purchase of an electric vehicle due to the advantages offered by these vehicles. At this point, spending on a technologically sophisticated vehicle is not one of the highest priorities of an individual. Because of the historically low oil price in this century, the primary benefit of electric vehicles over traditional ones is no longer applicable.
Impact of COVID-19 on Car Manufacturers
Firstly, due to the rapid increase in COVID-19 cases government issued orders to manufacturers to temporarily cease manufacturing, resulting in a scarcity of vehicles just as demand began to surge again. This predicament was brought about as a direct result of COVID-19’s efforts.
As a result of delays in the supply chain of crucial components like computer processors, the release of several new models have been delayed or pushed back.
There has been a rise in the demand for new automobiles because people are opting to drive their vehicles rather than use public transportation to circumvent the laws that will become effective in 2020. Nevertheless, attempts to entice drivers who do not need to go anywhere by public transit have been fruitless.
Impact of COVID-19 on Drivers
Within the framework of the automotive industry, the impacts of COVID-19 on specific drivers are seldom discussed. The fact that COVID-19 has overall, resulted in safe driving practices being adopted is the reason for worry. Since the overall statistics of fatalities and injuries on the road witnessed a temporary fall due to stricter restrictions, there has been an uptick in reports of drivers engaging in unsafe driving behaviours.
In many parts of the country, the number of vehicles on the roads is far more than it was a few years ago, and drivers these days are more likely to be speeding or driving under the influence of alcohol. When there is a breach in security, defensive driving abilities are necessary. Drivers need to extra cautious on the roads until it can be determined whether or not the pandemic has been contained.
However, there is some good news for drivers: when they go to trade in their vehicles, many will find that the value of their cars has grown, which will have the pleasant side effect of positively impacting consumers’ wallets for a change.
Impact of COVID-19 on Automobile Sales
Even though the number of vehicles sold dropped in the year 2019 to 2020, most dealerships had trouble moving their inventory owing to a lack of available vehicles. This was a problem for most dealerships. Many auto dealerships have lately reported record profits as a result of changes in customer behaviour, and watchers of the industry expect a significant rise in vehicle sales over the next few years.
Therefore, many people are projecting that once the economy has recovered, there will be an increase in car sales that will bring them back to the levels they were before the epidemic and even surpass them over the course of the following several years.
The natural manifestation of this might be confusing, particularly in pre-owned automobiles. The value of old vehicles has considerably grown during the last several years. Even if this is excellent news for the automotive industry, it is not excellent news for those interested in obtaining a low-cost automobile.
Impact of COVID-19 on Auto Shops
The interaction with COVID-19 has proven challenging for the typical automobile servicing centre. Most companies have seen unprecedented levels of demand for their products and services; nevertheless, this rise in demand has usually been accompanied by challenges such as increased prices, shortages of components, and a lack of available staff.
The latter is partially due to the fierce rivalry for skilled workers among firms specialising in auto repair, which has led to a widespread lack of qualified staff in the field.
Instead of stepping into the uncharted territory of the used car market, an increasing number of people are looking for help in maintaining the automobiles they own. In addition, many forwardthinking practices have been implemented to guarantee that the customers and the staff are healthy.
Finally, it is essential to point out that the current trend toward disinfection has resulted in detailing shops throughout the country more than there have ever been before.
A significant number of auto body repair shops have sought to mitigate the adverse effects of COVID-19 by reducing their expenditures wherever it was practicable to do so. This may include looking for a new supplier of the necessary components, adjusting the emphasis of your promotion, or even boosting your prices. However, many businesses have discovered that they may save costs by revaluating their insurance plans. Convenient auto repair shop insurance is in great demand as a direct result of the fact that time is money in the automotive industry.
In a nutshell, these are how COVID-19 has affected the automobile business. Experts agree that organisations will feel these effects and, as a result, must adopt new approaches to industry to survive the present economic crisis and other factors.
Once we get over this epidemic, other sectors will return to normal, but the car industry will continue to face difficult circumstances for at least another couple of years. With everything going on, it’s impossible to know what the future holds.