Moving Forward: How Covid-19 Is Re-Shaping the Automotive Landscape
The Coronavirus (Covid-19) pandemic continues to ravage the world, dealing significant disruptions to industries everywhere, including our beloved automotive industry.
With land travel being a major factor in ensuring that everything in the world runs smoothly, it can be said that the automotive industry is also a ‘frontliner,’ so to speak.
Unfortunately, this ‘frontliner’ is one of the most affected service provider that we have. The entire automotive supply chain has been compromised, from manufacturing, to distribution, delivery, and sales. The dramatic drop in productivity is completely changing how car brands operate. To cite a few examples, some car launches are now being held online, and the pageantry of F1 races have been relegated to the virtual world.
So, how else is the Covid-19 crisis changing the automotive landscape as we know it? Here are some of the positive and (mostly) negative forecasts from industry pundits.
Social distancing as the new normal
Physical distancing is an effective precaution against the transmission of the virus. To continue to ensure that transmission stays minimal post-ECQ, futuretravelexperience.com suggested that public transport will have to ensure commuters practice social distancing. From MRTs, to ride-hailing service providers, to taxis, buses, and UV Express, all modes of public transport must uphold travel measures that support social distancing and increased sanitation. Otherwise, quarantine and lockdown efforts, which has already brought the global economy to near-collapse, will be for naught.
New-car demand will rise again
In China, new-car registrations dropped by around 92 percent in early February. Financial service giant Moody forecasts that overall vehicle sales in the Forbidden Kingdom will see a 2.9 percent decrease for 2020, far from the 1 percent growth predicted before the onset of the pandemic.
“Cautious consumers are steering clear of crowded areas, including auto dealerships, while corporate demand for vehicles is weakening as broader economic uncertainties cause companies to scale back capital spending,” Moody’s report stated.
“Work stoppages and lower production levels because of government-mandated business days off, the reduced flow of migrant workers across China and disruptions in auto-parts supply chains have lowered production levels.”
The US saw its stock market crash late February after seeing record highs early in that month. Other global markets were also affected, since fossil fuel was in such low demand. In the Philippines, fuel prices have dropped by more than PHP 10.00 since the implementation of the enhanced community quarantine (ECQ).
Europe has its easy. Despite Italy and France being some of the worst-hit nations in the world, the pandemic is yet to deal significant downturns to new-car registrations in the region. As for car sales in February 2020, only Germany saw a double-digit decline for the month.
Despite these grim outcome, carmakers are still optimistic about sales, especially as lockdowns around the globe lift one by one. This optimism is driven by the idea that people won’t feel safe and secure commuting for a while, and many will probably opt to purchase a new car instead of braving a ride a bus, train, or some other mass transit. In China, sales are already rebounding after the government started easing its coronavirus measures early in April.
Deals and discounts galore
The only holdup is that many people have lost their source of income during the pandemic, so pricey purchases such as cars may not be possible for a lot of people. However, according to Bloomberg Opinion columnist Chris Bryant, those on the upper portion of the wealth triangle will likely be less affected by the financial impact, and will be more inclined to get behind the wheel of a new car, if only for physical distancing and sanitation purposes.
The ray of light, Bryant predicts, is that car dealerships will want to move their inventory fast, and so many dealerships will likely sell their cars off at huge discounts. Used car buyers will enjoy great deals as well, as many fleets will likely downsize due to the financial fallout that many businesses are going through. And there’s also the advantage of lower cost of operation, since fuel and parts will likely be sold at hefty markdowns as well.
These are just some of the short-term impacts that the Covid-19 crisis has dealt to the car industry in general. What the long-term effects will be remains to be seen. Regardless of what happens, one thing’s for sure—the automotive landscape as we know it will have drastically changed, for better or worse.
Volvo, Geely, Eye New Global Merger