Hassaan A, Yourprimecar.com
Posted: 25/04/2020
Who knew what started as a rare, unheard of virus, would transform itself into the global pandemic we see today? It seems as if the world has suddenly ground to a halt and yes, that even includes the automotive industry. From the roaring hills of Maranello in Italy, home to Ferrari, all the way to the land of Stuttgart, Germany, it is essentially overwhelmed.
Supply Chains
As the new era of social distancing ushers in, supply chains around the world have been disrupted, factories have all but shut down and demand for vehicles new or used, is at an all-time low. Just in the UK, new vehicle registration figures fell 44% just in March, making it the sharpest decline in 20 years, even beating out the 2008 global recession. Other countries such as Italy and France are faring even worse with a decline of 85% and 72% respectively. This is not only due to the fact that social distancing prevents consumers from visiting showrooms and dealer lots, especially since car dealerships are not considered necessary in trade. Rather, in these times of economic crisis and record unemployment numbers, people are much less likely to make a major financial purchase, like buying a brand new car.
Even if you put the government-mandated lockdowns aside, car manufacturers would have had to eventually close down shop either way. The global automotive industry relies heavily on its supply chains within China. These imported parts exceed $34 billion in value and since the country is in complete lockdown, there eventually would have been no parts left to manufacturer any vehicles. Even Volkswagen, an automotive juggernaut would have struggled to find enough parts to even make something as basic as a 2CV, which is just bits of scrap metal and shoddy glue.
The impact of coronavirus is by far the worst catastrophe that has ever befallen the automotive industry. Forget avocado enthusiasts not being able to get their brand new Ferrari 812 GTS’s on time, but even your family man’s Volkswagen Jetta is undoubtedly going to be delayed. According to the Alliance for Automotive Innovation, 93% of all automobile production was shut down by March 26th within the US. The few companies that do remain operational are currently hard at work at shifting production towards masks and ventilators among other medical equipment that is in short supply.
Sales
China, which is one of the biggest markets for any manufacturer saw a decline in sales by up to 80% in February. A lack of demand combined with supply shortages is creating a unique problem that no car company has faced ever before. This means that manufacturers will likely fall quite a bit short of their projected revenues for the year and some might need serious government backing just to make it out of this fiasco alive. However, all this has not stopped companies like Ford and Hyundai from trying to shift their existing stock off dealer floors.
Ford is offering up to six months of payment relief for customers who finance their vehicles through Ford Credit. Basically, Ford will pay for the first three months and you can have payments deferred for another three months after that. Fiat Chrysler is taking a similar approach by offering 0.9 % financing on a fair few Ram, Dodge and Jeep models for periods up to 84 months. Companies such as Hyundai, Honda and many more are offering similar incentives with lower interest rates and deferred payments for new and existing customers. So if you are in desperate need of a new car during this crisis, at least you will get a good deal out of it. Though how do companies expect you to comply with the social distancing rules without getting all close and personal at the dealership? Well since everything else has moved already online, it’s about time car purchasing moved towards a more digital solution as well.
Present
Dealerships are now offering home test drives. What that means is they will drop the car off at your house and let you test drive it to your heart is content, before coming back around to take it away again. In addition to this, they are also offering virtual tours alongside zero-contact buying, though you will have to eventually go to the dealership to pick up the car. So make sure all the technical jargon like insurance are sorted out beforehand online.
Companies such as Audi, Suzuki and Mercedes are planning to start up production in the coming weeks. The facilities will gradually come back online, though, shorter shifts will be introduced alongside fewer employees on-site to curtail the effects of the virus. However, despite some car companies getting back on track, it is most likely that 2021 model year vehicles will be delayed indefinitely until this pandemic begins to show signs of receding. Carmakers are now concentrating their efforts more on marketing their response to COVID-19. Data from iSpotTV states that automakers have spent an estimated $184 million on TV ad spots just in the US. Around 54,000 ads were showcased just between March 1st to March 18th. Most of these ads are showcasing current ongoing deals and incentives, though Ford used its new ad “Built to Lend a Hand” to showcase how it’s using its 100-year company history to do all it can to help out in these unprecedented times. Currently however, no data exists to suggest that sales have increased as a result of these marketing tactics. Though if you were looking to get yourself a new car, and are not as deeply affected by this pandemic as others. The low-interest rates alongside the plethora of incentives make it a great time to get yourself some new wheels.
At the end of the day, it remains unclear whether or not the industry will be able to recover in a reasonable amount of time or not. The willingness from dealerships and car manufacturers alike to quickly adapt to the situation has certainly helped, but given the extremely unpredictable nature of this pandemic, the future of the car industry is not out of hot water just yet.
