The corona virus pandemic will lead to a difficult and challenging time for the automotive industry in the current financial year. Car sales are expected to fall by about 40 percent. The corona virus pandemic is a major threat to humanity and industries around the world. This unprecedented crisis has had a global impact and has become the greatest threat to the world economy in modern history. Major impacted business sectors include travel, consumer goods, tourism, IT, automobile and insurance.
Although many major markets have faced signs of improvement on month-on-month basis in August, it is difficult to pinpoint the actual market position, as the pent-up demand obscures the underlying level of demand in the market. Furthermore, there is always a second wave risk of COVID-19. As a result, the current annual outlook for current point analysts is down 20% compared to last year. Besides Global Passenger Vehicle (PV) sales are estimated at approximately 71 million units. [Source: yourstory.com]
Indian Automotive Market
By 2021, India will be the fourth largest passenger-vehicle market in the world. It took seven years to increase India’s annual production from three million to four million vehicles. However, the next milestone – five million – is expected in five years. The automotive industry operates a long supply chain remarked by automobile parts manufacturer. It requires large amounts of material from steel to non-ferrous metals, plastics and electronics. The supply chain must be strong to ensure uninterrupted production on a daily basis. Most automakers have their own bases to supply materials or have China-based suppliers. These have severely affected the corona virus crisis.
Due to the corona virus crisis, demand from automakers around the world is declining significantly. This leads to environmental factors, technological upheavals and complex regulatory frameworks that can lead to difficult times for the industry.
The automotive industry, which is connected to the Indian economy, is already struggling with idle capacity, high production costs and low demand.
The following presumptions can be made: the auto companies, OEMs will commence production from mid of October onwards (if the lockdown is lifted), an expected standard price drop of one percent over all the segments, supply chains dismembered across the whole industry, however, a full-fledged industry like cars revs up hastily, the companies will be in full production level from October 2020 onwards.
United States Automotive Market:
The automotive industry in the US continues to be frail interposed by automobile machinery manufacturer & exporter. Vehicle sales reached to 1.33 million units with a decline rate close to 20% (YOY) in August. January-August 2020 sales reached 8.8 million units, down 23%. Toyota met 24.6 percent abrupt decline and Honda got -23 percent. Hyundai, meanwhile, fell 8.4 percent only (comparatively better). Less incentives and limited inventories will be continuing to hold back sales. [Source: freep.com]
Europe Automotive Market:
The easing of lockdowns in many countries, along with stimulus packages that will help revive the economy, has begun to benefit the automotive industry in the region. Vehicle sales crossed 1.2 million in August, down 16% on a YOY basis. Despite the decline, it is still performing well considering the high sales in August 2019 as before September 1, 2019, motorists rushed to move their unsafe vehicles forward for WLTP (Worldwide Harmonised Light Vehicles Test Procedure) testing.
China Automotive Market:
China automotive sales are recovering rapidly. Vehicle exports reached 2.2 million units in August with 11.6 percent increment (YoY basis). From January to August 2020, total exports fell by 10 per cent. Recovery is expected to continue in the coming months by improving NEV-friendly (New Energy Vehicle) policies like discarding of vehicle buying tax on NEVs and addendum of subsides till 2022 with a slow-moving phase-out pace and by improving car buying sentiment (mostly in the affluent classes). The government announced in June that it would increase the NEV credit ratio by two per cent every year until 2023 commented by auto parts manufacturers & supplier. The government has announced an increase from 12 percent in 2020 to 14 percent in 2021, 16 percent in 2022 and 18 percent in 2023. [Source: unido.or.jp]
Other Automotive Markets:
Japan: Vehicle sales crossed 326,000 units in August, down 16% on a YOY basis. The resignation of Prime Minister Shinzo Abe is expected to have a negative impact on the market.
South Korea: Sales of new vehicles in the country fell 6 percent to 112,000 units from five automakers: Hyundai, Ssangyong, Kia, Renault and GM. In December 2020, the government reduced the consumption tax on passenger cars by 30%.
Other Asia: Despite a significant decline in sales year-on-year, they are improving on a MoM basis. Major markets are recovering in MoM sales as lockdowns are easing.
Impact of COVID-19 on Automotive Digitalization
- In-vehicle Features:
People are expected to spend more time in their private vehicles (compared to public transport) which will increase the digitization in the vehicle. Navigation, Wi-Fi hotspots and digital keys are among the popular connected features. Of these, digital keys will be in high demand in the coming years as they are being implemented at low cost. With the growing concern over touch surfaces the need for virtual assistants, voice recognition, personalization and gesture control also increases.
- Security Features:
Accident prevention safety features such as automatic emergency braking (AEB), head-up displays, and lane departure warning (LDW) and surround cameras are expected to gain popularity. Features such as automatic cruise control (ACC) are expected to have a limited effect from the pandemic. However, since these security features are often sold in bundled packages, COVID-19 can help prevent their intrusion. [Source: europe autonews.com]
- Connected Living:
Cars are expected to have unlimited integration with home, infrastructure and other devices that promote the vehicle into all (V2X) technology. Increasing the coverage of 5G networks allows cars to integrate seamlessly with other devices and ecosystems. Vehicle to pedestrian (V2P) communication, in particular, sees development. However, huge investment involved in developing a V2X technology could detain its implementation, mentioned by automobile electrical spare parts manufacturer & supplier.
The declining number of connected services and garage trips that promote social distance will see an increase in the coming years. Touch less transactions allow you to refuel, pay tolls and make purchases anywhere. OTA updates are popular, limiting unnecessary trips to service centers.
Health and location-related apps are gaining popularity and helping family members track the position and well-being of their loved ones. Recently, GM released the Guardian, a smart phone – based application that uses phone sensors to detect crashes and alert emergency services. Other features of the app include roadside assistance and location status.
Digitization of cars from COVID-19 promotes social distance, tracking, security and efficiency as people adopt the digital life. The above mentioned services and features are seeing increasing popularity among car buyers. Other factors, such as increasing the number of screens in cars and increasing 5G network coverage, also contribute to digitization.