With the COVID-19 global pandemic no longer posing a threat to the world as it did a year back, businesses are starting to grow again. However, the aftershocks of the most significant economic halt caused by the ubiquitous lockdowns are still there. These effects on the auto industry are still evident. The auto industry is a volatile one, and any disruption in the market impacts it. The impacts of COVID-19 were particularly notable. These range from supply chain management and operations to loans and long-term strategies. While most effects have subsided, some are sticking around and have changed the face of the industry for years to come.
Impact on Employment
Like most other industries, the pandemic’s most notable impact on the auto industry was the economic setback. This effect was not as bad as was initially predicted. Part of the reason for it is the shared impact absorption by suppliers, financiers, automakers and employees.
Employees of the automotive industry were the ones who supported the major part of this financial burden. That is evident from the spike in unemployment in the US that hit 13.3% in May 2020. The numbers reached 48% in Detroit, a city known for carmakers.
However, not everyone was laid off. Many workers accepted pay cuts and agreed to work shortened weeks to help the industry avoid bankruptcy. Now, a year later, many of the employees have returned to work, but not everyone has got a return call to work.
An ambiguity that needs to be clarified here is that the industry was already planning a shift in the skills required to make cars. Due to the move towards electric vehicles and autonomous driving, automakers were looking to hire more electrical and software engineers to replace mechanical ones.
Even the development of autonomous vehicles has slowed down as automakers have other more critical things to look after, following the massive economic disruption.
Autonomous Vehicles No Longer a Priority
Automakers are forced to concentrate resources and energies on capital projects rather than research and development due to the pandemic’s economic impacts. That translates to the development of autonomous vehicles no longer being the priority.
Many companies that were planning to release level 3 and level 4 AVs by 2022 have pushed the dates back by years. The resources have now been diverted to the development of electric vehicles and other projects that can help reinstate the financial status of automakers.
A prime example of that is Volvo. They planned to release a fully autonomous Level 4 AV by 2024, which is now pushed back to 2027.
Likewise, Ford has also postponed its Robo-Taxi program that they started with Argo AI and has now invested $29billion in EVs.
All in all, that means we will have to wait several years before seeing autonomous vehicles driving on the roads.
Used Cars Market Boom
Due to the shortage of new cars driven by the pandemic global chip shortage and the increase in demand for vehicles due to people avoiding mass transit options, the used car market is booming. Companies like Gettacar are able to offer excellent deals on trade-ins due to the industry boom, leading to happier consumers. Even if you don’t want to buy a new car, you can take advantage of the situation like thousands of others by trading in a car you might not be using.
Ride-Sharing Demand Declined
Another of the pandemic’s impacts is on the ride-sharing industry. People have become reluctant to use these services because of the need for social distancing and personal space. The impact has been massive, Uber has lost $6.7billion during 2020, and Lyft saw a loss of $1.7billion. Uber has now focused its energies on the delivery business rather than the ride hauling one because recovering from this severe blow will take some time.
Increased Electrification
The most significant outcome of the COVID economic crisis is the increased investment in EVs. It cannot be said that this was solely due to the pandemic, but it did impact.
The best option for automakers was to invest their money in capital projects that could get them the best return. Electric vehicles are the clear winner in this.
The development of EVs was already in the pipeline, but the deadlines for these vehicles have become more aggressive now.
- Ford will be launching a whole lineup of battery electric vehicles in the EU by 2030.
- GM has announced it will end the production of internal combustion engine vehicles by 2035.
- Jaguar and Volvo will only sell electric power vehicles following 2030.
Other than the pandemic, the reason behind this is that governments have a firm stance on the global emergency that is probably more crucial than the pandemic- climate change.
Full Recovery Will Take Time
The impacts of the lockdown caused by the pandemic will not subside immediately. According to a survey, some Japanese companies are expected to recover by the end of 2021. However, some will take as long as 2024 to get back to the state they were in before the pandemic hit.
To Sum Up
As cars are not, strictly speaking, a basic necessity of life, people only buy them when they can afford them. The disruption in the auto industry is not just limited to decreased production due to COVID or chip shortage. The reduced buying power of the ordinary person also plays a role in it. As long as the economy does not fully recover, the automotive industry will not be stable. This has increased the demand for used cars, so now is the time to trade in if you have one.