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Covid-19 recession cuts deep into automotive industry

11 Jun 2020

Automotive companies are coming under considerable pressure now that vehicle markets across the globe are decimated due to Covid-19. However, this is the time to formulate strategies to bounce back and recover from the current economic slump, says data and analytics company GlobalData.

Photo by Obi Onyeador on Unsplash

David Leggett, an automotive analyst at GlobalData, says: “Automotive companies are facing a tough financial time in the market that will be greater than that of the 2007/8 financial crisis. This year is about riding out the downturn and conserving cash, but also being ready to capitalise on gradually returning demand and recovery.”

GlobalData's base Covid-19 light vehicle sales scenario forecasts a fall of 17.6% from 2019 to 74 million. Declines are heavily weighted to Q2 while measures to suppress the virus allow for recovery from Q3 onwards.

Markets around the world are starting to come back, although it is still a volatile picture while the public health emergency persists. Vehicle manufacturers are also able to restart factories under new safety protocols, which is another positive sign. However, there are multiple challenges ahead for these companies as they eye recovery ahead.

These range from operating at much lower volumes to controlling costs and managing cash while also ensuring that investment in the right products and future-facing technologies continues.

Leggett concludes: “The automotive industry, with its high fixed costs and big-ticket products, is more exposed than most in this crisis. It is imperative that companies evaluate their mid-term strategies to address the pathway to sector recovery over the next 18 months or so.”