How Covid-19 is devastating the auto industry

How does Covid-19 impact the automobile industry?

Have you considered buying a new car during quarantine? We haven’t either. It turns out that since Covid-19 has been swallowing up the world as we know it, a small number of industries and dodged the bullet, most industries are severely damaged and others are being completely devastated.

The automobile industry sits in the latter category. Not only are people and businesses not buying new vehicles but the companies aren’t able to produce them either with lockdown enforcing reduced manufacturing output.

Cars are central to the driving instructor industry. Driving instructors cannot run their businesses without them and learner drivers cannot put their pass certificate to good use without them.

The purchase of a new car for most people however, is somewhat of a luxury. Yes occasionally your old car can completely break meaning you have to purchase a car, but most of the time renewing a car is a treat but not an essential, especially given the large financial commitment it comes with. So for the purchase of a new car to fall into the high-cost, non-essential category in a time when the UN claims that Covid-19 could cause the equivalent of 195 million job losses – you probably need to strap in for a bumpy ride.

How has Europe been impacted?

Across Europe the average shutdown duration of factories to date has been 24 days. Naturally, this number is increasing each day quarantine is enforced and the future looks ever more gloomy with the lockdown extensions being announced by governments.

The 24 days of factory shutdown translates to a reported 1.9 million vehicles that haven’t been produced. Even more worrying is when we look see that a staggering 1,138,536 jobs have been impacted in the automotive manufacturing industry.

To give an idea of scale, there are approximately 2.6 million jobs in the EU auto sector so that would mean 43% of jobs are impacted.
The split of those jobs across Europe varies depending on the size of their respective automotive industry. The country which seems to be suffering the most is Germany with at least 568,518 jobs reported to have been impacted.

In the United Kingdom, while the damage is less than Germany the cut still runs deep. According to the European Automobile Manufacturers Association, at least 65,455 employees have had their jobs impacted by Covid-19 and over 150,000 motor vehicles haven’t been produced.

Like-for-like, the UK car market is down 44.4% in March 2020 vs March 2019.

What does this mean for the Automotive Industry?

Behind the big numbers from each of the countries are car manufacturers that are feeling the pain of the market contraction.

While Ford are stepping up and using their production facilities to produce 50,000 ventilators according to Just Auto, they also reported that they are expecting to report a loss $2bn in their first quarter of trading.

At the premium end of the market, Porsche reported a modest dip in sales of -5%.

Less thought of but equally impacted by the decline in car sales are the tyre manufacturers. Goodyear Tire reported that their first-quarter sales were down by -18% vs last year.

What’s the plan for recovery?

So far, it’s been rather doom and gloom. The big question is what happens next? How can the automotive industry pick itself back up and get back to where it once was?

In answer to this question, the ACEA have laid out four guiding principles that need to happen in order for this strategic industry to restabilise.

The four key principles are:

   1. Defining a coordinated strategy to safely relaunch vehicle production as soon as possible
   2. Stimulating market demand for all vehicle categories
   3. Unblocking type approval and registrations of the latest technology vehicles
   4 Accelerating investment in recharging and refueling infrastructure

In short, get the full supply chain up and ready, generate demand to pull the supply through the chain and remove any friction and regulation which could slow down the process.

We hope that for the benefit of all of our learner drivers who are looking to purchase their first car and driving instructors who can’t operate without one the automotive industry soon bounces back.