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Impact of COVID-19 on Automotive Industry

Impact of COVID-19 on automotive industry

Industries all across the globe are fighting their way through the COVID-19 pandemic. Whilst some industries tiptoe towards a recovery in operations, others are still working on their structural and policy reforms. The automotive industry is going through a tough time with the COVID-induced market changes in terms of decline in sales, changing supply chains and manufacturing process.

In these unprecedented times, the question arises on the lifespan of the current scenario. As we witness the global customer’s behavioural change, the ongoing discussion points to whether it is a temporary period in time or one that will take a significant part of the future. Countries have been easing their stringent lockdown rules, companies restoring to work back on the floor, people started commuting, but there is still one question that persists – for how long?

Auto Industry Challenges

Automakers everywhere, all over the world are looking for solutions for the post-corona virus phase and what potential impact it might have on the sales, production, and manufacturing ends. The evident fall of sales and recent production halts might be temporary, and with the restoration of normalcy, we can expect a gradual reversal to the earlier behaviour and demand across nations.

The industry is facing challenges from all sides – the customers, managing workability, issues with their manufacturers (OEMs) and other suppliers. These include trials in terms of necessity, shifting demands and operational failures for the units.

The changes in the auto industry can be summarised as follows:

  1. Widescale Unemployment

  2. Unemployment numbers have skyrocketed across nations. The COVID pandemic has led governments to undertake precautionary measures to contain the virus spread, and its resulting financial impact on various industries has led to an exponential increase in unemployment all over the world. The spending power of consumers has drastically reduced to survival measures, and with an evident lowered consumer spending on automobile purchase, it has affected the demand for new vehicles.

  3. Customer Behaviour Change

  4. The ongoing pandemic has brought about an evident behavioural change in the consumer’s lifestyle. These include preference shifts in individual transportation means and modes, an inclination for personal vehicles instead of sharing ones, increased social distancing norms, lowered demands of ride-hailing services, etc. The automotive industry is coping with the sales fall resulting from these behavioural changes and simultaneous negative economic growth, which impacts the buying decision of its customers. Other challenges from the economic factors like job security, lower spending and consecutive demands undergoing rapid change, the auto industry is gearing to outline changes along with the production and operational front.

  5. The decline in Demand and Sales

  6. With the initial outspread of the virus, everything had come to a halt, and with the gradual reopening of the lockdown guidelines, industries are adopting and working on the changes required to fulfil the customer’s distinct demands. The UAE witnessed a decline in the number of pre-owned online car listings by almost half in April. With factories struggling to resume operations and the low requirements, the automobile industry waits for the situation to step towards normalcy and other industries to reopen their work processes, which in turn will bring consumers to use existing vehicles.

    For countries facing prolonged lockdowns and the resulting uncertainty, the industry is witnessing a decline in demand for newer car models, Original Equipment Manufacturers (OEMs) are facing operational halts with the low market demand and supply trends in the industry. Several automakers plan on waiting before they start the production units again.

  7. Disruption in Supply Chain

  8. The automotive industry is encountering a challenge with the production units that are facing difficulties in their processes due to its disrupted supply chain across the globe, and since they cannot move, the former has to look for alternatives that also meet the quality specifications. This hurdle creates trouble for the management across productions as they have to cover the cost associated with inventories, storage and also to find new suppliers that meet existing standards.

Impact on UAE’s Automotive Industry

UAE’s auto market also reports a trend towards normalcy, as the commercial outlets reopen. Other reports from this year’s car sales in the UAE reflected a 48.4%  decrease as compared to the previous year. With the first two months of 2020 showing a flat trend in sales, the numbers for March surfaced with over a million for the passenger cars sold. This figure forms the base for positive future predictions in the sales numbers. The projection for the regular data to return the industry still extends to the year 2021. 

Production forms an essential aspect of the automotive industry. Companies are eager to resume production as soon as possible and are just waiting for the safety lights to turn green. Countries are beginning with their auto production gradually as they find themselves released from the COVID grip and back to normalcy – China is almost back with its auto-production since March-end, and countries like the United States’ ongoing with their fight have yet to begin productions, UAE reports prepared inventory to meet the demands in the coming quarter.

It will be challenging for the industry across various countries to counter varied demand uncertainty and integrating risk mitigation protocols in its processes. 

If you’re a resident in the UAE and looking for post lockdown or regular car repair and services, visit Carcility. Be it for a service booking for your car sanitisation or routine checks, Carcility is your one-stop car-care solution.  You can get your queries answered and also place a service request from the best auto mechanics in the region by visiting our website or by downloading our car service app

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