The aftermath of the horrific Kovid-19 and its aftermath in the global economy has left little room for imagination. In the aftermath of the epidemic, there was a huge bedlam in the world of art. The onset of coronavirus was particularly devastating for the F&B, aviation, electronics and automotive sectors. Indeed, the automotive industry, which was left with pre-epidemics, electrical mobility, ride-sharing and countless other disruptions, fell short of its bright future, as experts began to wonder if the sector would ever see the light of day. The end of the tunnel.
When the epidemic was at its peak in 2020, the automotive sector seemed to be at its worst. As emissions and changes in consumer needs have already caused many problems, such as environmental problems, car sales decline and the spread of COVID-19 due to political uncertainty, car manufacturers had to deal with more problems. According to ratings agency Ind-Ra, automobile sales in India were expected to decline by 25% in 2020-2021. The epidemic thus exacerbates the existing challenges in the automotive industry, creating unprecedented uncertainty among market players.
According to experts, although the sector is set to see a slight improvement in 2021, compared to last year’s catastrophic situation, it will still have a long way to go before it reaches pre-epidemic levels. The following paragraphs summarize the many critical challenges faced by the automotive industry during COVID-19 that will help you understand the current state of the vehicle manufacturing space.
Top 6 main challenges in the automotive industry
# 1 Stop production
Outbreaks appear to be exacerbated during the period of severe social distance protocols and nationwide lockdowns. Governments around the world have enacted health and safety regulations, making production shutdowns one of the most significant challenges in the automotive market. The outbreak of the virus has raised a huge question mark over whether normal production will ever resume; In response, 2021 has seen China return to production, albeit not with the same rigor as before. The United States and Europe, however, are still struggling to regain regular vehicle production. Recent studies have shown that in April 2020, car sales in Europe decreased by 84% compared to April 2019.
Manufacturing shutdowns have exacerbated the challenges of overproduction and resource shortages in the already existing automotive industry. They lead to massive fiscal losses, directly affecting GDP. Even after production began in 2021, the sales graph was linear. To that end, automotive companies now need to change their approach to car manufacturing – adopting Industry 4.0 for efficiency and manufacturing resilience is the key here.
In addition, experts believe that manufacturing shutdowns may remain one of the most important challenges facing the automotive industry during COVID-19. This suggests that governments now need to simplify emissions laws to encourage the adoption of battery-powered electric vehicles. Automakers also need to accelerate the pace of technological change in the automotive sector to move away from conventional production standards and processes.
# 2 Low vehicle sales
The decline in car sales during the Covid-19 has emerged as one of the major challenges facing the automotive industry. According to reliable estimates, the pre-epidemic number of auto sales in the United States alone is predicted to reach 16-17 million units by 2020. The outbreak of the epidemic has triggered a statewide lockdown, causing financial losses due to social distance regulations. , And closed production units. At the time, the potential for a potential vaccine seemed slim; And what with the additional restrictions, car sales witness the lowest ever.
This certainly does not come as a surprise; In an epidemic situation, purchasing a vehicle will be the minimum priority for customers. Despite expectations, the numbers are staggering – according to the Society of Motoring Manufacturers and Traders, the UK automotive industry lost 1.3 billion GBP in 2020 sales. Lack of sales has led to excess inventory, high levels of debt and uncertainty over demand.
# 3 Extensive pruning
The loss of labor is a public effect of the cessation of production As the coronavirus spread, many companies had to resort to massive layoffs, which emerged as one of the most important challenges in the automotive market. Nissan, for example, shut down its unit in Barcelona, Spain, after reporting huge losses. Many European companies had to employ short-term workers during COVID-19. Swedish automobile maker AB Volvo announced last year that it plans to lay off 4,100 white-collar positions at its H2 2020 company.
Despite the store closures, automotive companies have encouraged their workforce to apply for unemployment benefits and other benefits. For example, when BMW’s U.S. production facility in Spartanburg, South Carolina, delayed its opening date until April 30 instead of April 12, the German automaker said it would lay off 11,000 workers on the unit by the extension date, as well as pay them. Including healthcare facilities. Although the industry has begun to recover, dealing with workers can be one of the continuing challenges of the automotive industry, as it will take some time before it returns to a stable position.
# 4 Disrupted supply chain
The introduction of COVID-19 immediately shut down current production, disrupting supply chains around the world. China, which was initially hit by the epidemic, was hit by a nationwide lockdown that affected nearly two-thirds of its vehicle production, severely affecting the supply chain. Auto supply chains are not often spread across geographical areas; As each country imposes its own protocols after the epidemic, supply chain management is hit hard, emerging as one of the most important challenges facing the automotive industry during COVID-19.
Autonomous supply chains have suffered more than mismanagement and disruption; They will now be under additional pressure due to interruptions in semiconductor production and restoration of electrical mobility. General Motors, for example, announced in January 2021 that it aims to have a complete portfolio of zero-emissions vehicles for sale by 2035. The epidemic has clearly exposed the existing fragility. Supply chain analysisHighlighting that resilience and transparency through digitization and other agile practices is the only way for autonomous companies to move forward.
# 5 Liquidity
Liquidity was the biggest challenge facing the automotive industry last year. The epidemic regime reiterated that cash was indeed the king. With production shutdowns and declining sales, there has been a gradual heavy financial loss, with OEMs operating at minimal liquidity. Lack of funds can lead many small-scale auto companies to go out of business. Cash reserves were at an all-time low during COVID-19; The situation is not likely to change anytime soon.
As the challenges of the financial automotive industry continue to reign, automakers need to secure government support measures to secure liquidity assistance. Use Artificial intelligence in the automotive market Predicting real-time cash flow and establishing a relationship with financial institutions to invest in integrated technology and automation are also some of the options that automakers can address the liquidity challenges of the automotive industry.
# 6 Change in customer behavior
The collapse of the economy, rising prices, and the dire state of public health and finances have led to significant changes in consumer purchasing practices. Although in the beginning, during a crisis like epidemic, buying a car was the least concern for everyone. Due to scarcity of money and uncertainty of the future, consumers have shifted away from vehicle purchases, which has emerged as one of the major challenges in the automotive industry.
For those who could afford the strict protocol during the lockdown, it was impossible to buy cars from dealerships and offline showrooms. At the same time, after COVID-19, many automakers tried to go offline, offering short-term subscription-based lease models for customers, digitizing car purchases, and taking many more steps to restore lost consumer confidence.
Although 2021 saw a one percent revival of the consumer base, overall, the number of customers is still low and it is likely to remain one of the most significant problems in the automotive industry for several years to come. Changing customer behavior could significantly change the automaker’s business model, ushering in a new era for electric mobility, connected cars and automation.
Experts expect that the automotive sector will be full of risks and challenges for some time to come; It may take several years for this industry to regain pre-epidemic success. In the years ahead, autonomous organizations must work to address existing challenges through strategic action. In the beginning, choosing a digital mode can work and bring benefits to consumers. Furthermore, automakers need to move fully from conventional production models to automated work processes while ensuring flexibility.
The adoption of state-of-the-art technology and the integration of connected vehicles into the mainstream is likely to open up new sources of income for automakers in the coming years. As governments help change emissions laws, automotive companies work to build more resilient supply chains, and run more intensive R&D programs to set new standards, the automotive industry may slowly see a return in the next half decade or so.