*Editor’s note – please check back regularly, as our global automotive team will be updating this article with the latest insights on the impact of COVID-19 to the global automotive industry. For questions or to talk directly with an automotive expert, please email info@duckerfrontier.com
We are constantly monitoring rapidly changing developments surrounding COVID-19 to separate signal from noise and provide the most important insights for your business, now with a centralized hub for all of our analysis.
DuckerFrontier’s automotive and materials experts are keeping track of the latest COVID-19 developments and their impacts on the global automotive industry. Below are recent insights from our experts:
- Companies are revising their expectations: Automakers are revising their global production and sales volume expectations amid the continued spread of COVID-19. LMC Automotive revised its 2020 annual North American vehicle production forecast downward by nearly 10% or approximately 1.5 million units. Although a rebound is expected, production volumes are expected to fall short of the 16.7 million forecasted for 2021. While many suppliers have up to 90 days of finished parts on hand, open-ended labor shortages and the burden of identifying alternative materials will continue to impact production. With OEMs officially halting production through the end of March, ripple effects of supplier plant shutdowns are being felt across the industry.
- The extent of the impact depends on consumer behavior and production needs: Does supply chain protection have a significant impact if consumers cannot go out to purchase vehicles? While supply chains may be the first element to suffer amid a labor shortage, the industry can be impacted at any point in the business cycle. Aside from a lack of consumer purchases, the entire supply chain will be disrupted, as plants will shut down for four to eight weeks due to “social distancing” measures in most US states and Canada. The lag between Europe’s, North America’s, and China’s outbreaks will help rebuild the missing inventory of parts resulting from the shutdown in China, which could create better alignment for a clean start when the confinements have ended. OEMs and tier suppliers will hit the ground running once they have the green light to reopen production facilities.
- Unknowns continue to stall planning: New cases of COVID-19 are decreasing in China and South Korea, but cases in Europe and North America continue to rise. Response strategies are constantly changing as we learn more about the contagion’s patterns. Could production parts be carriers of the virus? Are protocols in place across the globe to sanitize shipments? Executives should monitor responses from suppliers and local governments across the globe for potential impacts to their supply chains.
- Looming global recession: Unlike the 2008–2009 automotive recession, the current situation isn’t suffering from high structural issues (such as overcapacities), and—based upon economic recovery capacity—the market will likely resume and ramp back up slowly after confinement measures are lifted. However, secondary effects to the financial markets could impact employment and create uncertainty in demand, resulting in further production adjustments.
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DuckerFrontier’s Automotive & Transportation team is at the forefront of key trends impacting the industry. How can we help you deliver the best performance for your business in 2020? Contact us to connect with an industry expert.