The economic shock resulting from the coronavirus outbreak could pose several challenges to automotive manufacturers, especially those in Asia as major industrialized economies like South Korea, Japan, and Italy are among the most affected regions due to the pandemic. Furthermore, as a majority of the global auto parts supply chain is connected to China, the production shortfalls and supply chain disruptions in China due to the aftermath of the COVID-19 outbreak could have a great impact on automotive manufactures across the globe. For automotive manufacturers, surviving and emerging stronger at the far end of this crisis will require thinking beyond the next fiscal quarter.
Why the COVID-19 crisis could be extremely challenging for automotive manufacturers
The spread of Coronavirus will affect all sectors, but it could have some serious implications for the automotive industry that could exacerbate problems for players, these include:
- Difficulty in anticipating potential disruptions as the automotive supply chain lacks transparency beyond their direct vendors
- Complex global footprint of automotive companies could result in difficulty to develop a synchronized response
- Automotive sales largely involve test drives and dealership visits by customers. As almost all countries around the globe have imposed lockdown, restrictions to commute, and isolation measures, it becomes nearly impossible to interact with customers and close sales deals.
Considerations for automotive manufacturers to reduce the impact of COVID-19
Ensuring employee protection
Automotive manufacturers must protect employees by making their health the paramount concern and adjusting production accordingly. Automotive companies must follow the most conservative guidelines available among leading global and local health authorities such as the WHO. Health support programs for infected employees and remote working facilities must also be put in place.
Safeguarding the supply chain
Automotive manufacturers can establish a supply chain risk assessment team to evaluate and understand the impact of COVID-19 on their business. Evaluate the key risks involved and create full supply chain transparency by using big data, intelligent systems, and connected ecosystems. This could play a pivotal role in communicating shortages or other supply chain challenges, enabling automotive players to prepare, adapt or adjust accordingly.
Managing manufacturing shutdowns
While the automotive manufacturing sector in China is gradually becoming more stabilized as the nation brings COVID-19 under control, the same is not the case with manufacturers in the US and Europe. There is uncertainty at large in these countries relating to when the automotive manufacturing plants can resume operations. At this juncture, companies in the automotive sector must keep close contact with their suppliers to ensure a quick ramp-up occurs when the market begins to recover. Production levels and schedules can also be adjusted accordingly. Measures must also be taken to ensure workers’ safety, cleanliness, and physical distancing among workers post COVID-19. Embracing industrial IoT concepts can also help manufacturers increase efficiency and prepare protocols for a similar crisis in the future.
Managing declining vehicle sales
The dropping sales in the automotive industry since January 2020 is a clear indicator of the adversity of COVID-19 on automotive sales. Recent US automotive sales forecast also hints at a sharp decline (approximately 10%) as customers are more likely to refrain from automobile purchases after the pandemic. One of the key strategies for automotive companies to manage this situation includes staying connected with customers via mobile and online channels. Rethinking their existing sales model to embracing digital channels and direct sales models is the way forward for companies in the automotive industry. Companies can also consider channeling their lead generation efforts to online car customization tools used by prospective buyers. Canceled trade shows can also be re-organized through virtual event platforms. Several players in the automotive industry are also contemplating establishing a contactless sales process to meet the increasing health and hygiene requirements.
Automotive companies must develop a rapid response to address the ongoing market challenges due to COVID-19. Our industry experts are helping several companies across the globe achieve this, want more insights?
