Auto Industry Hammered by COVID-19
Matthew Greenwood posted on April 02, 2020 |
Factories close as carmakers reel from the coronavirus’ effects.

The auto industry, like so many other sectors, has had its hands full dealing with the coronavirus pandemic.

The Detroit Big Three—GM, Ford and Fiat Chrysler Automobiles (FCA)—announced the unprecedented decision to shut down their factories as of March 19. Around the world, other carmakers have taken the same measures—from big consumer names like Toyota, Volkswagen and Kia to specialty brands like Bugatti, Ferrari and Rolls Royce. Electric vehicle manufacturers, such as Tesla and Rivian, have also closed down their factories.

The industry has also canceled major trade shows, including the Geneva Motor Show and similar events in New York and Detroit, to help curb the spread of the virus.

“There was no reason to think auto manufacturing would be immune to the impact of COVID-19,” said Karl Brauer, executive publisher of Kelley Blue Book. “We’ve already seen it alter business practices across every sector of the U.S. market.”

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Automakers fully expect to feel the effects of the COVID-19 pandemic for the remainder of 2020 and beyond. Analysts expect that demand will be down 6 to 8 percent this year and is expected to continue to be fragile into 2021.

To complicate matters, more than 80 percent of the global auto supply chain runs through China. Hubei Province, where the outbreak originated, is one of the country’s major automobile production centers. But Hubei’s factories are slowly starting to reopen as restrictions are being lifted.

Yet, even after the pandemic is controlled and people’s lives slowly go back to normal, the industry still faces a tough road ahead. People who have been dealing with reduced—or nonexistent—incomes throughout the pandemic may not see a new car as a priority for a long time, which will significantly reduce demand. In fact, 80 percent of automotive companies report that COVID-19 will have a direct impact on their revenue.

Carmakers will still have to deal with existing vulnerabilities, such as trade disputes—particularly those involving the U.S. and China. Manufacturers will likely revisit their car rollout strategies for the coming years, which could lead to factories working in a diminished capacity or a reduction in the variety of product offerings.

Whatever the economy looks like after COVID-19 is stopped, the auto sector will undoubtedly continue to be an important factor in the global recovery.

“The effects of the virus will ripple through our economy for a long time,” said Debbie Dingell, who represents Dearborn in the U.S. House of Representatives. “However we will never be able to rebound without the hardworking men and women of the auto industry.”

Read more about how the coronavirus is impacting manufacturing at COVID-19 Hard Hit for US Manufacturing Supply Chains, Revenue.

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