The coronavirus outbreak has the potential to reshape the auto industry in ways that go far beyond the short-term effects on sales and production.
“COVID-19 is hitting the industry just as we’re seeing a transition from the old traditional value tools and profit pools into completely new ones,” said McKinsey senior partner Andreas Tschiesner. As such, he said, the pandemic will act as both an accelerator and a stress test for existing trends and future business models.
Tschiesner and other analysts predict that the global auto market will be smaller, with sales and production in a prolonged slump. In 2020, both are likely to be down about 20%-25%, meaning roughly 70 million passenger vehicles will be built and sold, compared with more than 90 million in 2019, and more than 94 million in the record year of 2017.
IHS Markit expects that it will take until 2024 for global sales to return to pre-pandemic levels. Even then, volumes will remain around 10 million vehicles below IHS’s previous forecast track, which showed production reaching nearly 104 million vehicles in 2027.
To deal with this uncertainty, IHS and other analysts have been gaming out situations. In IHS’s best case, the industry recovers by 2022. In the worst case, recovery is pushed beyond 2025. Tschiesner of McKinsey expects a recovery around 2023.
Tschiesner said that a faster transition to digitizing the “customer journey” will pay dividends for automakers, starting with the supply chain.
“The future is going toward online,” he said. “Automakers want a direct touch point with consumers, because what we also see in the future is that the business model will change toward recurring revenues, software updates and monetization of data offerings, like Tesla is doing.”
Early post-lockdown studies in China show that private cars, walking and bicycling have gained while bus and subway ridership has fallen, McKinsey said in a report.
“We believe that there is potential that investments are cut because of difficult economic situations, which could delay mass adoption” of self-driving vehicles, Franjicevic said.
Now, for hygiene reasons, potential riders may be reluctant to get into a robotaxi that has been used by numerous people earlier in the day,
A number of auto companies have said publicly that they are putting autonomous vehicle investments on hold, with profits from the technology years away.
IHS predicts that out of 458 global starts of production expected in 2020, 393 will take place, a 14% decline.
At the same time, “work from home” for white-collar workers is increasingly being seen as a long-term solution rather than a temporary remedy. PSA Group, which had been pushing many workers to telecommute before the crisis, said it would make the option available to 80,000 of its 200,000 employees worldwide.
Because the pandemic is not over, automakers, suppliers and analysts are hesitant to make predictions. All agree, however, that there are opportunities and lessons to be learned.