COIVD 19 Impact on Global Automobile Sector
The outbreak of COVID-19 was identified in China in Dec 2019. However, the spread of Coronavirus does not remain limited to China, more than 175 countries and territories have reported cases of COVID-19. As of 14th April, 1,812,734 are confirmed infected cases of COVID-19, while 113,675 have lost their lives. Covid-19 has a shocking effect on the world’s economy. Almost all the industries from manufacturing to service are hardly affected by the outbreak of the pandemic. Talking of the impact on the Automobile sector, 80 percent of automotive and related companies reported that coronavirus will have a direct impact on their 2020 revenues. 78 percent of companies do not have enough staff to run a full production line.
The Automobile sector is directly or indirectly affected by the Republic of China for automobile parts and tyre imports. Due to the outbreak of COVID-19 in China, Many factories have shut down and while some have resumed partially, utilization remains low. So it is affecting the import and export of automobile parts, therefore, hampering production.
In Europe, new car registrations declined by 7.5% and 7.4% (YOY) during January and February. Overall sales, in the region, are also declined by 7%, mostly due to steeper declines in key countries like the UK (-5%), Germany (-6%), Italy (-20%) and Spain (-10%) – which together account for a majority of vehicles sold in Europe.
In the USA also Automobile sector is not deprived of the consequences of the pandemic. The big three automakers – GM, Ford, and FCA US have decided to idle their plants in North America. Toyota, Honda, Tesla, and Nissan suspended production in North America. According to a report by Counterpoint, the estimated sales decline in the USA is 6% during 2020 of automobile.
The Indian Automobile industry is also adversely affected by Covid-19. It is estimated that there will be an overall revenue impact of at least $1.5 -2.0 billion per month across the industry. Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra & Mahindra Ltd (M&M), Tata Motors Ltd and Toyota Kirloskar India Pvt. Ltd sold a total of 111,600 vehicles in March, according to sales data published by these companies. The demand is severely hit as they wary of the fast-spreading coronavirus and the importance of maintaining social distancing, avoided automobile showrooms. In terms of passenger vehicle segment also most of the countries registered double-digit drops in car sales. Like in other countries in the world. Japan showed a 10.94% decline in sales, while china being the highest declined 43.66% in sales data. (As shown in the figure)
Since everyone is unsure of the future spread of this pandemic. It can be uncertain to quantify the future consequences that the automobile sector needs to bear but it will lead to widespread loss of consumer confidence, impacting automakers revenues and profitability. Auto companies may be forced to divert capital to shore up continuing operations, starving R&D funding for advanced technology initiatives.