The automotive industry has been taking quite a beating because of the global pandemic. That's not news, of course, because we've been saying it repeatedly, and you've undoubtedly seen it happening before your very eyes. Yet, we’re seeing clear signs that the auto sector is bouncing back. Now is an excellent time to ask, 'How is the automotive industry recovering from the global pandemic?"
The auto industry is undoubtedly in recovery, but it's not the same across the board. For instance, parts manufacturers are starting to recover thanks to an increase in car parts sales, though new cars sales are not recovering as briskly. Car part makers are adapting to the crisis and improving their processes too. Auto electrification is still on track, though semiconductor shortages are still an issue.
We'll explore some of the signs of recovery (or lack thereof) in the auto industry; hopefully, it'll paint a clearer picture of what automotive industry recovery might look like in the short- to long-term future.
Are There Signs of Recovery in the Automotive Industry in 2021?
First of all, let’s answer the big question: Is the industry recovering? Yes, it’s fair to say that the global automotive industry is indeed in recovery. Simply put, things aren't as bad as they were in 2020 when the pandemic first started, leaving us all confused and scared for the future.
Back then, supply chain issues were so bad that imported parts and whole cars were hard to come by. Thankfully, Australia’s homegrown auto parts makers helped fill a significant portion of that gap.
Still, the recovery of the auto sector is not uniform industry-wide. Some sectors and geographic locations are recovering better than others.
Parts Manufacturers Are Starting to Recover
For sure, parts manufacturers are experiencing an upward spiral within the auto sector. There is plenty of news from leading auto parts manufacturers in Europe and Canada that show an increase in demand for auto parts, whether they're for building new vehicles or for aftermarket parts sales.
Part of this demand is coming from other countries like China. As their economy continues to recover, more and more people choose to ride around in private vehicles rather than take public transportation.
Parts Manufacturers Benefit From Car Sales Recovery
Different parts of the automotive sector are closely tied to one another. So, any trend that affects one will impact the other, as well. One reason why car part manufacturers are in recovery is the gradually increasing demand for new cars.
In China and elsewhere, an increasing number of people are choosing to ride around in private vehicles rather than take public transportation.
That leads to a straightforward chain reaction: when demand for new cars increases, so does the market for the parts needed to build them. As countries gradually ease their lockdown measures and more people start to mobilize again, some analysts expect car sales to increase in 2021.
Parts Selling Better Than Whole Cars
For the time being, however, automotive industry recovery does not seem universal and is instead happening to some sectors before others. For instance, it appears that auto parts are selling better for the time being than whole, brand new vehicles.
As we've seen several times already, leading car manufacturers worldwide have delayed releasing several new models, sometimes pushing release dates back multiple times.
It’s safe to assume that even though new models aren’t coming off the assembly line yet, there are still plenty of existing cars on the road that need repairs and replacement parts.
Electrification and Tech Convergence on Track
One thing has stayed the same before, during, and will probably do so even after the pandemic in the automotive sector, though: car electrification and convergence with new technologies continue to increase.
Even with parts shortages, delayed releases of new models, and anything else that might be happening, more and more carmakers are adding all-electric options to their lineups with increasingly better ranges and other performance specs.
What Challenges Lie Ahead for the Automotive Industry?
Despite all the positive signs, some clear challenges lie ahead for the industry. Two of them, which we can already witness being a problem, at least in the short- and medium-term, are an uneven recovery (in terms of geographic location) and chip shortages that have been troubling the industry lately.
Uneven Recovery across Auto Sectors and Regions
Automotive industry recovery is not uniform; that’s clear. Earlier, we mentioned that the uneven recovery is happening in different sectors of the automotive industry, but the same is also happening across geographic regions.
Firstly, some regions suffered more than others during the downturn in 2020. For instance, auto sales decline was more severe in Western Europe and North America than in other parts of the world. Well, that also means that they stand to recover the most as things pick up again.
Countries like China, for example, didn’t see too much of a drop in auto sales in 2020. So, their recovery in 2021 might not be as dramatic as a result.
Chip Shortages Plague the Auto Industry
As the auto sector becomes increasingly reliant on new technologies, it also becomes dependent on semiconductor chips. Early this year, the industry suffered (and will continue to suffer) from a massive shortage of semiconductor chips and similar disruptions in the supply chain.
Toyota, for example, said that they would have to stop production at two car plants due to this shortage.
While this chip shortage may not be directly related to the pandemic, it will undoubtedly exacerbate the auto industry’s problems which started because of it.
Tune in to Carpart.com.au for More Updates!
Automotive industry recovery during this pandemic is an ever-evolving situation, given that there’s no certainty about the pandemic’s timeline. To keep up to date with what’s going on, be sure to tune in to Carpart.com.au’s Blog. There, you’ll find periodic updates about the auto sector in Australia and elsewhere around the world.
By Ray Hasbollah