Around the globe, many car factories lay dormant as a result of the coronavirus crisis. Offices that would usually be occupied by staff managing all facets of the automotive trade, from parts acquisition to finance, are empty. In many places – including the UK – dealerships are shuttered, garages are closed and auctions are silent. Only limited services remain, to ensure those who need to stay mobile can.
This near shutdown of the global automotive industry, which began in earnest in March, has been caused by what would become identified as ‘Coronavirus disease 2019’ – COVID-19. It has presented many with a rapidly changing and unpredictable situation, resulting in dramatic and sweeping actions that have led business and private individuals alike into uncharted territory. This, coupled with continued unknowns about the new coronavirus itself, poses many questions for the future.
HOW COVID-19 TOOK HOLD
Back in December 2019, as everyone was gearing up for 2020, the first outbreak of an unknown respiratory disease was documented in Wuhan, China. It quickly transpired to be an easily transmitted viral infection and one that could have severe consequences for those who fell ill with it. Unfortunately, the spread of what was identified as a coronavirus quickly escalated; more became ill, deaths began to climb and stringent quarantines and travel restrictions were enforced.
The World Health Organisation consequently escalated its warnings about the new coronavirus disease – caused by what was later identified as the virus SARS-CoV-2 – and, on 11 March 2020, declared it to be a pandemic. Some four weeks later, nearly 1.9 million cases have been reported globally and coronavirus-related deaths have climbed past 114,000.
Slowing the spread of the disease has become one of the key goals of many a country, in order to reduce stress on the health care systems while solutions are sought. Strict quarantines and travel restrictions have often been introduced and enforced, as a result, which has led to over a quarter of the world’s population living under lockdown.
What is now often simply dubbed ‘coronavirus’ is also taking a predictable and heavy toll on businesses. For starters, many governments have shut down non-essential companies to try and halt or slow the spread of the coronavirus. Many of those that remain open face numerous issues, including quarantine-induced slumps in custom and stocking issues due to coronavirus-related problems in production and logistics networks.
COVID-19 AND CAR PRODUCTION
Unsurprisingly, such wide-ranging disruption has hit the automotive sector hard. Many manufacturers – including Ford, Nissan, Volkswagen, Toyota, Ferrari, Bentley, Mazda and Aston Martin – have shut down production facilities and supporting infrastructure due to the need to ensure the safety of their workers.
The Society of Motoring Manufacturers and Traders (SMMT), which provides data and reports on UK car production and sales, has cast ominous warnings about upcoming figures. “Despite the myriad global challenges the UK automotive industry has faced in recent times, it remains fundamentally strong and February’s figures reflect that,” says Mike Hawes (pictured above), the chief executive of the SMMT. “However, these figures also reflect the calm before the storm; with UK car plants now effectively on national shutdown, and many global markets closed, the outlook is of deep concern.”
The ongoing suspension of production and sales will unquestionably result in financial turmoil, even for major organisations. Volkswagen, as a case in point, is still spending around £1.8 billion a week despite the closures. Herbert Diess (pictured below), the company’s chief executive, explained in an interview on German channel ZDF that the company can sustain itself for a few months – but not forever.
Other companies, including Ford and General Motors, have been withdrawing, borrowing and collating funds and assets to help them survive for the duration. There will be other knock-on effects; affiliated companies will struggle as well, such as those producing parts for manufacturers, due to the closures. All could end up needing, should the shutdown continue for an extended period, significant financial aid.
“We wholeheartedly welcome government’s extraordinary package of emergency support for businesses and workers, but this must get through to businesses now,” says Hawes, speaking on the matter of the UK automotive industry. “If we’re to keep this sector alive and in a position to help Britain get back on its feet, we urgently need funding to be released, additional measures to ease pressure on cash flow and clarity on how employment support measures will work.”
It is not only the manufacturers and the supporting companies that are at risk. New car sales themselves have tumbled (March’s figures were down by 44.4% compared with a year ago), as all dealerships have been forced to shutter their showrooms due to the coronavirus-related closure of all non-essential retailers. China’s automotive market, which has reputedly already weathered the worst and has recently started to re-open factories, gives further indication as to what may happen elsewhere; in February, as people stayed home and dealerships fell silent, new car sales in the first two weeks dropped by 92 per cent compared to last year’s results.
COVID-19 AND THE USED CAR MARKET
The used car market will also suffer; many auction houses have closed or gone online – while the inability to view many a used car will quell much of the activity in the private market. Some dealers are offering remote purchase and delivery services, that said, which will allow limited trade to continue.
What happens to values remains to be seen but the consensus appears that they will, in the short term at least, remain relatively steady – because the markets are effectively paused, with sellers and buyers simply sitting it out until the situation changes.
HELP FOR CAR OWNERS
At least, for the owners, there is some good news in the form of payment holidays, extensions and restructured payment plans – which should alleviate some of the initial pressure and worry. The government has seen fit to introduce measures such as a six-month MOT extension, too, meaning owners of eligible cars need not worry about taking their car to be tested; it must, however, be kept in a safe-to-drive state.
The ramifications of the COVID-19 situation truly range far and wide. Time will ultimately tell as to what happens; for now, all we and those involved can do is follow official advice, look after those who need care and do our best to support hardworking and tireless medical staff. To them, we remain truly thankful.
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