How coronavirus has impacted the auto industry

Throughout the years, many tough circumstances have affected the economy. However, COVID-19 might end up having the most widespread influence since the Cold War. This outbreak has presented us with truly a global challenge.

In today’s interconnected world, one industry’s shutdown can cause ripple effects on other sectors. For example, as a company that offers car shipping services, the state of the auto industry can affect us. In this post, let’s see how the pandemic has impacted the auto industry and how that, perhaps, translates to all of us.

How have automakers been affected by the Coronavirus outbreak?

With the start of the outbreak, many businesses were forced to take drastic measures. Sure, sending the IT team to work from home is easy. But how do you keep an entire factory safe from the virus? Faced with this challenge, country officials left such companies no other choice but to shut down production.

The auto industry, for example, took a massive hit. Manufacturers had their factories closed for nearly two months. It all started with Europe at the beginning of March. By the end of that month, all of Europe’s auto factories had shut down. US manufacturers also had to follow suit and halt production.

Fortunately, most of them have reopened, and now auto workers are slowly going back to work. Even so, they have to follow new rules, and returning to their old rhythm will be a challenge. Things still remain slow, as uncertainty continues to loom in the air.

How has the auto industry shutdown impacted the economy?

When the Detroit factories shut down completely, about 150 thousand workers were left idle.

Those months put a terrific strain on the economy, because of the necessary unemployment benefits and supplemental pay. Even when people are returning to their workplaces, the two-month idling has residual effects.

Problems may also arise elsewhere. As we have mentioned in our Corsia Logistics COVID-19 Update all the way back in March, most business sectors had been presented with various issues. Those were somewhat magnified by the auto industry shutdown. Here is how:

• Dealerships. Car sales plummeted, with some companies reporting 37% drops. However, that does not necessarily relate just to being shut. During such crises, people do not usually splurge on big purchases. That leads to a natural decline in car sales. Still, it is somewhat of a vicious cycle that ended up hurting both automakers and dealerships.
• Car shipping. Carriers that work specifically with manufacturers and dealerships, had their work cut off as well. Though shipments did continue, the chaos around the pandemic made things quite unstable. Ultimately, fewer vehicles sold meant fewer vehicles shipped too.
• Car shows. Virtually all big shows in various niches had been canceled. The Geneva Motor Show cancelation was one of the most severe hits for the automotive world. Such things lead to a lot of marketing plans (and money) going down the drain. As of now, big-scale events still have no green light. However, some smaller-scale events, like Ford Performance, have gone virtual.
• The enthusiast market. You may not realize this, but car enthusiasts are a big crowd. Thankfully, a few weeks without manufacturing has not been an issue with them. The market did see somewhat of a dry period, but that is because essential products win over hobby splurges.

Things have a long way to go before we call them normal once more. We do not know what the long-term ramifications are going to be, but we can hope for the best. Predicting such outcomes is a hard task, so we prefer not to speculate. One thing is certain though – automakers already operate on low margins. Which begs the questions…

Will car companies find a way out of the crisis?

Everything is getting a shakeup now. One look at the stock market can tell you as much. With that said, you can rest assured that most big companies have contingency plans. So, do not fall for economy doomsday scenarios just yet.

Of course, there is no way that those two months will not have a huge effect on the car market. We do have to admit that 2020 will simply not be as profitable as the last couple of years.

With that said, businesses have been expecting a recession for a while now. Many economists have pointed out that we have had quite a good run, and it just has to end at some point. The Coronavirus sped up the process that was inevitable anyway. Let’s save ourselves the doom and gloom predictions, and instead take a hopeful look as businesses slowly open up doors.

Right now, this is what you need to know: the auto industry has gone through a rough patch. And so has the entire economy. Still, we have always recovered after a crisis. Stay hopeful, do not panic, and do the best with the time you have. You can use it to improve your skills or even develop new ones if you are not back to work yet. That is always valuable!