Impact of COVID-19 on the Automotive Industry

Impact of COVID-19 on the Automotive Industry

The Coronavirus breakout has led to a decline in sales in the automotive industry. The demand for new vehicles has gone down as more people are staying at home to prevent the spread of the virus. General Motors (GM), Fiat Chrysler, and Ford have suspended production of automotive in the United States.

Impact of COVID-19 on the Automotive Industry

• Volkswagen, United States, has been the first automotive assembly plant to shut down as a result of the Coronavirus pandemic. The shut down is more of a precautionary move to prevent the spread of the virus. Other OEMs (Original Equipment Manufacturers) are expected to shut down as well, which will cause further disruption in the automotive supply chain and production.
• Due to the Coronavirus outbreak, the Volkswagen company is experiencing logistics and production problems, according to Reuters. Around 7,000 employees in the company might be laid off, and the stoppage could go on for six weeks.
• According to ALG, in a scenario where the automotive industry in the United States makes a recovery by April 2020, new vehicle sales will be around 4 million, a decrease of 500,000 units, or an equivalent of 2.9% decline from the initial forecast made before the Coronavirus crisis.
• If Coronavirus continues to spread for a longer period, new light vehicles sales will be around 5 million, a decrease of 2.4 million vehicles, or an equivalent of 14.2%, according to ALG.
• Coronavirus has affected consumer confidence and vehicle inventory availability in the United States, which in turn has impacted the automotive supply and demand levels. Fewer vehicles will be sold in 2020 than what was projected at the beginning of the year.
• General Motors (GM), Fiat Chrysler, and Ford have had to suspend production of automotive in the United States, Europe, and North America as a result of Coronavirus pandemic. This move will affect the ability of the industry to catch up on production levels and targets depending on how long the suspension will last.
• In the United States, automotive sales of March are already decreased by 38,000 vehicles, and the decline is expected to continue. Seattle saw an 18% decrease in automotive sales while San Francisco had a 17%
• According to Adam Jonas, auto sales in the United States could reduce by 9% as consumers will choose to delay non-essential vehicle purchases.
• People with cars are bound to drive around more as a result of reduced mass transit systems, which will increase the mileage on vehicles increasing the servicing needs. Automotive servicing departments in the United States will have an increased volume of customers, the longer the Coronavirus pandemic extends.
• Prolonged slowdown in the automotive industry will result in a 15% year-over-year decrease in sales in the year 2020 in the United States.
• The COVID-19 virus was confirmed in Michigan, which caused shortages in the supply chain. Michigan represents around17% of the United States’ automotive output and represented 3% of the United States’ manufacturing GDP in the year 2018, according to the U.S. Bureau of Economic Analysis.
• Automakers in the United States, including Fiat Chrysler, General Motors, and Tesla, have been struggling to obtain parts for manufacturing operations form Chinese Suppliers since the Coronavirus breakout.
• According to Dziczek, the United States automotive industry should expect more disruptions of United States sources, from demand crisis to supply
• The supply chain disruption in the automotive industry and productivity downturn is already affecting supply, new-car demand, and vehicle registrations in the United States. According to Nagle, if the United States shuts down automotive sales for a month,5 million units will be lost.

How Companies are Addressing the Impact

• According to Automotive News, Volkswagen closed down its United States plant on the 16TH March 2020 to allow for cleaning of the plant as a measure to prevent the spread of COVID-19 virus. The company will pay its employees for the time off.
• Due to the expected increase in automotive servicing needs, vehicle servicing companies are considering lengthening their hours of operation.
• Some automotive manufacturing companies intend to combat the effects of COVID-19 to their businesses by providing their office employees with the necessary tools to work from home, implementing travel bans, and increasing the availability and supply of sanitation materials to ensure continuity of business.
• In the United States, some automotive companies like Ford and General Motors have enacted new visitor protocols in a bid to reduce the exposure of employees to the COVID-19 virus.
• To attract consumers, vehicle companies in the United States are now providing lucrative offers on their vehicles. For example, Ford Company and General Motors are offering new vehicle financing programs to increase sales in the middle of the COVID-19 outbreak. For new vehicle purchase, Ford announced that the customers have the option to delay the first payment for up to 3 months while General Motors is offering 0% financing for seven years.
• The United Auto Workers (UAW), Fiat Chrysler (FCA), and Ford Motor Company in the United States have come up with a “COVID-A9/Coronavirus task force” to implement strategies to protect its warehouse employees and automotive manufacturing from the adverse effects of COVID-19 in the three companies.

Research Strategy

Your research team scoured through credible websites and databases to find information on the impact of COVID-19 on the automotive industry in the United States. We were able to find extensive data and insights on the subject, how the Coronavirus breakout has affected the manufacturing, sales, and the supply chain of automotive and how the companies in the industry are addressing the challenges.