Impact of Covid at Auto industry- Guide

When the world first came to know about the mystery illness in China, many did not think much of it. After a few months, the entire world went into lockdown. No risk manager or researcher could have predicted that the virus would impact our lives and businesses to this extent.

Now, almost two years later, the world is still battling the disease. Despite the development of vaccines, countries face challenges in vaccinating their population. Due to vaccination challenges, COVID-19 outbreaks are still happening worldwide. The only response to increasing cases is a lockdown.

The pandemic and lockdowns have devastated nearly every industry one can think of, especially sectors like the automobile tire industry. Unfortunately, the automobile sector supports various other industries, including the tire manufacturers, which is equally affected. This blog post will discuss the impact of COVID-19 on the auto industry.

Without taking any more time, let us start.

Impact of COVID-19 on Auto Industry

Reduced Demand

One of the most notable impacts is the low demand for automobiles. The reason for a reduced demand is the low purchasing power of the consumers. Why? Because of the lockdowns, people found themselves out of jobs. Others had their income reduced significantly. Due to reduced or loss of income, people avoid spending on luxury products like cars. Instead, they begin to save money, limiting spending to essential items only. It has a spillover effect on related automobile-related industries. For example, consider the tire industry. Because of low car demand, the tire industry suffers too. If people are not buying cars, tire manufacturers must stop manufacturing tires. In turn, this affects the rubber industry and so on.

Less R&D Spending

Due to the automobile industry’s precarious financial situation, companies are diverting funds from research and development and channelling it to their operations. While many may criticise the move, there is no other option. A reduced R&D spend means that innovation will take a hit. In other words, consumers should not expect any new revolutionary features any time soon. Due to the lack of any attractive features, customers will be dissuaded from buying new cars. Indeed it is a challenging time for automobile manufacturers.

Exit from Markets

Many automobile companies would exit from markets that are less profitable or loss-making. The move is aimed at reducing expenses and focusing on the most promising markets. In normal situations, automobile companies can offset losses from strategically vital markets through profits from well-established markets. The exit means that a company is leaving the market open to competitors.

Restructuring

Due to low profitability or even considerable losses, companies will undoubtedly focus on restructuring. In simple words, they will either phase out brands, sell them to others, or combine various business units. The purpose of combining business units is to pool the resources and get rid of any extra employees.

Supply Line

Another notable impact of COVID-19 on the auto repair sector was the disruption of the supply chains. Many companies were unable to get the materials required for production. Even suppliers found it hard to meet clients’ orders, due to which many faced financial hardships.

Wrap Up

This concludes our article for today. If you have any questions in mind, feel free to ask them, and we will get back to you promptly. Thank You. While the article has summarised the main impacts of COVID-19 on the auto industry, our opinion is that the full scale of the impact is still not known. Only time will tell how long it will take for the auto industry to bounce back. It can be argued that customer behaviour has been significantly altered by COVID-19, meaning that auto industry needs to do something extra to get consumer attention.

Author Bio

M Junaid Lead Writer, Content Marketer at PitstopArabia | Mitsubishi Tire Brand, A writer by Day and reader by night