The Impacts Of The Pandemic On The Automotive Industry
No businesses and industries were spared from the effects of the recent pandemic. The majority of the business sector worldwide stopped, and many have had to cut costs by closing down branches and shops and laying off employees. Some even had to close down permanently, while others have announced they will follow suit shortly.
The pandemic threw the economic outlook into the pit of uncertainty and brought forth long term impacts on most sectors, including the automotive industry. Production was disrupted, which lead to delays and other problems regarding the supply chain. Other than that, since quarantine protocols were initiated, people’s interest in purchasing cars diminished, resulting in a decline in sales.
Now that some months have passed, automotive companies are still exerting effort to recover from what was lost. With most of the world’s economy coping in today’s business climate, see how the recent pandemic affected one of the world’s largest business sectors.
Labour conflict and factory closures
To some manufacturers, closing down factories is part of surviving this global crisis. Analysts said that automakers all over the world had 20% more factory capacity than what they needed. Since sales went down after the pandemic hit, most of those underused factories had to shut down operations.
The situation is challenging, especially for the big plants in Europe. The struggle is real for companies that manufacture smaller cars because of their tendency to be less profitable. Aside from the economic element, they’re also feeling the pressure politically because of the resistance they’ve met in laying off their employees.
In light of the reduced production capacity of carmakers and the change in consumers’ purchasing behavior, the original equipment manufacturing (OEM) business of tyre companies is also affected. Experts expect tyre price renegotiation in the remaining months of the year to keep the volume and that there’d be no sudden increase in sales post-pandemic because of business losses.
Delays in tech deployments
This year, a survey found that almost 65% of firms said they’re expecting to see delays in technology deployment in upcoming projects. An auto industry semiconductor analyst from IHS Markit, Phil Amsrud, cited the survey and an example of consequences due to said delays. He noted that a 7-nanometer node size chip might instead be delivered in a 14-nanometer node size, which will lower the expectations and ambitions that the industry has for autonomous vehicles (AV).
However, this doesn’t mean that AV chip development work is out of the picture. What it eludes to is that it will be slowed down, and consumer expectations should be tempered. This is also due to the decreasing auto sales that affect the timelines of various projects considering the current state of the economy and the conservation of financial resources.
A change of pace in international trade
The automotive industry is globalised, and so most manufacturers depend on supplies and raw materials coming in from different parts of the world. Since production is affected because of the pandemic, various manufacturing plants have either encountered or still encounter shortages in terms of necessary materials. It only compounds with the problems of having fewer plants and people to do the work.
Companies and suppliers are taking a more cautious approach to globalisation, which will continue to be the case for quite some time. On a positive note, major players in the industry firmly believe that the supply chain is built to withstand the impact of a crisis, so there’s no reason to cease international trade.
The author, Rosette Monell, is a freelance writer.
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