Impact of COVID-19 on the automotive sector
The impacts of COVID-19 is evident in every sector. The virus has been declared as the global pandemic and this has lead to lockdown in many parts of the world.
Due to this, there is a disruption in exports and imports.
The global economy is heavily dependant on the automotive sector. This is because it is an interconnection to services upstream (steel, glass, rubber, textile, etc) and downstream (repair, modification, mobility services)services.
It is estimated that every direct auto job is linked to 5 indirect auto jobs. With over 35 million people employed in the automotive industry in the world, the GDP also depends on the automotive sector.
Prior to the outbreak, there was unsold inventory of BS-4 vehicles, which estimated to be INR 6,300 crores. This is because of the government mandating the BS-6 compliant vehicles to be manufactured and sold.
After that the outbreak, due to which many migrant workers are not available. This leading to a delay in the supply, just like a domino effect.
As there is no one purchasing an automobile there is a stoppage of production. which results in the lesser manpower requirement which leads to unemployment. Many companies have fired their employees.
Due to this coronavirus breakdown, there is very little chance of people buying an automobile after things normalize. It would take some time for people to invest in something like an automobile.
Then next comes the financing companies facing a bad time. Many customers need to pay their loans, while there is also a very less chance of people buying a new vehicle.
Then the mobility solutions, used cars market, the after-sale market which mainly depends on their growth on sales is also the worst hit. Firms that provide shared mobility solutions may have to rethink their ways to overcome the social distancing norms that people are going to be bothered.
While the automakers have to come up with ways to sustain during and after the outbreak, they are most likely to
- respond to the outbreak with some measures
- recover from disruption
Automakers are coming with means of selling a vehicle online with the help of VR and live broadcast. This initiative is being taken by automakers like Volkswagen, Nissan BMW, and SAIC.
A Chinese company named Geely has introduced contactless delivery of vehicles, while the key is delivered with the help of drones. there will be no contact with the vehicle from the factory to the door step. This has attracted some potential buyers and has garnered around 10000 bookings.