With the financial crisis of 2007-08 still fresh in the minds of industries and businesses, the COVID-19 pandemic comes to them as possibly the most unsettling disruption since the Great Depression.
The New World Order
For the next 18 months or so (the assumed period that it would take to discover a vaccine), there will be greater interventions from the government, economies will be defined by low oil prices and increased e-commerce, manufacturing industries will have to shift, and digitalised services will be the norm.
For the automotive sector, adaptability is the key. In Australia, the auto industry has been on continuous negative growth for two years now, and this current crisis could well be its final straw. But when you're down, there's no other way to go but up! To soften the impact of the current crisis, industry players must adjust to the new norm.
Restructuring the Supply Chain
The supply chain has proven to be the global industry’s weak link, if not its weakest.
Reduce dependence on imports
The COVID-19 outbreak has exposed the weakness of most global industries, the automotive industry included. With more than 80% of the world’s auto supply chain dependent on China, global production took the hit. Also suffering direct losses are automakers with production and sales activities in China. That Italian, South Korean, and Japanese manufacturers are also flinching badly from the outbreak does not help the industry’s cause.
To manage this impact, automakers must operate with agility. Their supply chain must be transparent, interconnected but diversified, and capable of predicting shortages or disruptions. Reduced reliance on imports should also be a part of the new strategy, and this is what an automotive parts manufacturer in Australia has taught us.
Instead of taking the production offshore, the AMA Group works on a local supply chain and uses locally-sourced raw materials. In the face of this crisis, it maintains its reliability and resilience as an auto parts manufacturer. AMA produces both OEM and aftermarket car parts, including ute accessories and car protective parts. So while demand is low as expected and competitors are scrambling for supplies, the company is poised to spring back once the lockdown is lifted.
As countries cautiously reopen their doors, the threat of the coronavirus continues to lurk around the corners. Companies must establish safety protocols for their workforce and customers. Suppliers must set in place adequate measures to sanitise auto parts and ensure contactless delivery.
Manufacturing Plants Must Adapt to Change
According to analysts, the best forecast would be a severe pandemic as opposed to the worst-case scenario of an uncontrolled global emergency. The manufacturers' return to full capacity production will be slow due to chronic bottlenecks. Partial operations will most likely start by mid-June, with the earliest full capacity resumption possibly happening in the third quarter. Full recovery will not arrive until 2023-2024.
The operative word is ‘adapt.’ Those who can’t or won’t adapt will fall behind. Unfortunately, resilience has no template. Short- and medium-term plans of actions will vary depending on local situations. Generally, however, these will be aligned to the new world order.
- Oil prices will continue to be very low, and this could set back the demand for electric cars.
- Generally, people will have reduced interest in private passenger cars, and annual sales in light vehicles will drop by at least a fifth from last year.
- With the new norm of social distancing, the shared mobility or ride-hailing segment will lose its market. Some levels of travel restriction will remain in many regions, resulting in reduced spending on car parts, maintenance services, fuel, and insurances.
Embrace the new norm
So as manufacturers reopen their plants, they must factor all these changes into their production strategies.
- Thus, EV production can be slowed down, at least temporarily.
- Production lines must roll out fewer private cars and more light commercial vehicles, given the increased demands in e-commerce deliveries.
- The ride-hailing fleet, on the other hand, can be rejuvenated to serve as frontline transportation services.
- As what is already being done, automakers can shift production to focus instead on high-demand medical equipment and PPEs. Again, at least temporarily.
- Safety protocols and quick response mechanisms must be set in place, as is the case in all other industries.
- Setting up of new standard operating procedures must be established before carrying out a return-to-work order for employees.
- The used car and vehicle leasing segments also need to adjust to the times. Used car businesses should seize this opportunity when people are wary of spending too much on a new car, while automakers are operating on partial capacity. Vehicle leasing offers a similar, inexpensive appeal. Both segments can address rapidly-changing customer demands by reinventing their services and offering more flexible terms.
Consistently woo the end-users
Just because there’s a crisis assaulting the industry from all fronts doesn’t mean that automakers and dealers have their hands tied behind their back. There’s a lot they can do to make their presence felt and connect with the market.
- Do promotional campaigns, including digital ads, virtual test drives, discount offers on new cars, attractive warranties, and other value-added services.
- Digitalise all aspects of retailing, as much as possible. This should enable customers to shop and compare vehicles and car parts online. The digital service should extend to the purchase and delivery of automotive products, ensuring a completely touchless transaction.
Even as countries plan to reopen and lift their lockdowns, the COVID-19 threat is far from over. For that reason, governments don’t call the reopening ‘post-COVID-19’ because the outbreak remains real in the here and now. Instead, it is called ‘post-lockdown.’ In New Zealand, possibly the country with the most stringent lockdown imposed, car dealerships are fast-tracking technology to enable customers to buy cars using online tools.
The new norm demands that automotive companies reset their systems and reinvent their services, and that’s what we’re doing at Carpart. We make access to car parts sellers easy, quick, and safe for you! Our request-a-part tool makes all that possible for you. Just fill in a short form (because you want us to find you the correct part), click ‘send’, and sit back. Interested sellers will forward you their quote and best offer, saving you from making endless calls and describing what you need over and over. It's a tedious process, we know, but our car part finder simplifies all that. Give it a try today!