The toll of the coronavirus pandemic has weighed heavy across a multitude of fundamental industries, not least the automotive sector. How impactful that toll is and will be is yet to be fully seen, but what we do know is that the economic disruption it has caused within the auto industry to date has been nothing short of immense.
Over the course of 2020, the top 20 original equipment manufacturers (OEMs) in the global automotive sector posted a collective $100bn drop in profits. Across that period, consumer thinking around vehicles has changed, and many businesses at the lower end of the ladder have ceased operation.
In spite of all this, there is room for recovery in the industry – the big question is how and when by? Looking ahead to a post-pandemic market, what can we expect from a resurgence in the automotive sector?
A multi-dimensional problem
To understand the recovery, we first need to identify the issues the pandemic injected into the automotive world.
Starting with the obvious, the economic and operational issues spanning from the pandemic have been significant. A much-reduced demand for new vehicles has both stalled manufacturing processes and destroyed profits. Aside from the nine-figure loss mentioned above, workforce problems have also presented themselves, with 95% of workers being put on short-term work within German manufacturers during the pandemic.
Secondly, the automotive industry was already navigating turbulence created by a number of disruptor technologies arriving in the sector, namely electric mobility, driverless cars, ride sharing and automated production. While making adjustments for all these major changes, COVID-19 has added another hugely complex level to organisational planning this past 12 months.
The third lies in the legacy of the pandemic and the changing lifestyle habits it’s developed within in society. One of the most prominent, or glaring as far as automotive backers are concerned, is the working from home revolution, which is set to vastly reshape consumer thinking on the importance of their cars.
So, three distinct problems, each posing their own individual complexities and, more importantly, demanding an answer.
While recent growth patterns and predictions from financial experts within the industry have obviously had to be reshaped, the effects of COVID-19 have actually accelerated many of the developments already going ahead in the sector. The growth of e-commerce within auto retail is one of those trends, as is the increased willingness of OEMs to cooperate and collaborate with partners both inside the industry and out.
There is, however, no set pattern for recovery across the board, and different facets of the automotive world have responded to the challenges in front of them in a number of ways.
- There has been a divide in the industry between consolidators and innovators – some entities have looked to change as little as possible within their framework to “ride out the storm”, while others have adapted to new opportunities where possible in order to survive.
- The impact of the remote workforce, on a broader scale, has been incredibly damaging to the automotive sector as demand for vehicles has dropped massively. Within the sector, however, remote working has actually provided a number of benefits surrounding productivity and output – forcing carmakers to improve communication, break down fractures within their organisation and create hybrid office models that are better futureproofed than previous.
- The forced acceleration of digital services within the auto world has brought the sector up to speed with the wider appetite for e-commerce consumerism. The rise of aspects such as “click and collect” have helped to drive forward efficiency of sales and upgrade underwriting processes in the insurance industry.
- COVID-19 has also forced many manufacturers and other automotive entities to challenge their existing operating models quicker than they otherwise would have. With much of the car industry still harbouring relatively traditional working methods, the adoption of better tools, improvement of HR methodology and maximisation of virtual engagement have all created positive disruption in areas where it was welcome, and indeed due.
Legacy, and recovery
Of course, for all the positive connotations mentioned, there are equal if not more negative ones coming out of the pandemic. The economic picture still remains bleak in the immediate and uncertain for the future, while fears of a second wave downturn in consumer interest is also predicted. There should be no surprise in this, though, as a global pandemic was never going to be a good thing for an industry as dependent on human movement as automotive.
Still, for all the businesses gone and the worrying numbers coming out of 2020, there is cautious optimism for those who remain. 2021 may be unclear for automotive businesses, but the forced reorganisation of their infrastructure to make it more efficient for future consumers, not to mention an assumed recovery in the appetite for cars, should see many automotive entities return to former glories in due course.