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Corona pandemic: What impact will COVID-19 have on automotive production?

Tuesday, 29. December 2020 | Benedikt Lüchinger

The Corona pandemic is affecting the automotive industry worldwide, in some cases with drastic consequences. What impact does this have on purchasing habits and the industry in general? Answers to this in this article.

It might be hard to comprehend, but it has been almost a full year since the World Health Organization declared a global pandemic of the Covid-19 virus. In the last 12 months, all of our lives have been significantly changed. The worldwide health crisis left a profound effect on the global economy, industry, culture and established a “new reality” in which we all live, whether we like it or not. The pandemic outbreak has managed, and in a very short time, to completely change the way we look at everyday activities like shopping, traveling, or even working. That being said, we can indeed say that even when this is all over, and there is no fear of this dangerous virus, our lives and daily routines will almost unrecognizable.

One of the areas in which the global pandemic hit the most is the travel industry and micro-mobility sector. As you remember, in the spring of 2020, airports were deserted, trips canceled, hotels empty, and there were very few people that dared to get on the bus or train. The public transport sector experienced a sharp decline of 42%, and over 80% of all companies instructed their employees to work from home.

What is the impact of Covid-19 on the car industry?

The car industry was at the center of this disastrous trend. Not only did 50% of potential customers refused to think about buying a new car in 2020, but the demand also had fallen sharply almost overnight.  However, this is not all; car companies were faced with workers missing work due to health concerns, supply chains being stopped, transportation issues, and lack of funding.

If we concentrate on three of the world’s biggest markets (Europe, China, and America) and analyze the sales figures, we can see that all three markets experienced a brutal drop in new car sales in the first quarter of 2020. In the midst of Covid-19 chaos in China in February of 2020, recent vehicle sales were down a staggering 82%. In Europe, April of 2020 was the worst month, with sales down 78%, and in America, 46% fewer cars found new owners.

However, after the devastating spring, the second and third quarters of 2020 showed some recovery signs, with numbers going green on some markets. For example, China is showing that there is a demand for new vehicles that the sales in Q3 are up by 7%. In America and Europe, September sales were up by a single-digit percentage, as well. Not much but enough for optimism amongst the car companies and the dealers.

Besides that terrible dip in new car sales, most of the car industry’s biggest names stopped their factories for several weeks in early 2020. Although it cost companies millions of dollars, this move was justified with a health scare and lack of information about Covid-19 in general. However, almost all the factories have resumed production since.

Resuming production wasn’t without its difficulties. Supply chains, especially those from China and overseas, proved to be riddled with problems. Companies affected with Covod-19 cases weren’t able to deliver parts and components on time, prolonging the full-scale production for months. For example, Ford had announced that 2021 Bronco deliveries would start six months later due to problems with the supplier of hardtop components.

An unexpected rise in second-hand car sales

Even though the new car sales were down across the board in the first quarter of 2020, the global car market experienced an interesting phenomenon of increased interest in second-hand cars. This was particularly noticeable in America, where the market just could get enough of used trucks, vans, and station wagons. This showed that in times of specific crisis, there is a need for usable and cheap vehicles. Also, most of the buyers were essential workers who needed pickups and vans for work.

Used car dealership

What were car classes untouched by the global pandemic?

nterestingly, the super luxury and exclusive sports car sales seemed beyond the realms of global pandemic and health crisis. Almost all luxury brands like Rolls Royce, Bentley, Ferrari, Lamborghini, and McLaren will post a profit in 2020 even though they stopped production for several weeks during the first wave of the pandemic. The number of delivered cars will be slightly less than in 2019 only due to the fact that the production was seized for some period in Q1, but the shareholders will be happy.

 

Ferrari is a perfect example, and although it will deliver slightly fewer cars in 2020 than it did in 2019, the company will still post record profit due to healthy Q2 to Q4 sales. Ferrari was amongst the first significant luxury car brands to close its facilities since Italy was the first big European country to impose a complete lockdown due to the Covid-19 pandemic. Even though the Ferrari didn’t produce a single car for seven weeks, it managed to kick start production very soon and met the market’s demands.

Sales increase luxury cars covid 19

New car shopping habits influenced by Covid-19.

One of the reasons for the decline in sales numbers was that car shoppers thought that car dealerships were unsafe places and that social distancing was impossible to perform there. However, those dealers who managed to deliver a “contactless and paperless” approach gained the customers’ trust. Car buyers relied heavily on online configurators, quotes, and communication, and Covid-19 helped further improving the implementation of modern technologies in a process that has been unchanged for decades.

That is why we can expect that online car shopping will get more and more popular in the next period as the perfect way of finding, specifying, and ordering a new car without the hassle of going to the dealership. Of course, the test drive is still something you need to do in an “analog” way.

You can find more exciting articles from the world of Edel & Stark in our online magazine.

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