How Coronavirus Will Affect the Auto Industry

This is the Coronavirus Case Studies series. Every post in this series will talk about how the coronavirus pandemic of 2020 will affect different businesses for years to come. We’re all still processing this massive, life-changing event. This week, we talk about how coronavirus will affect the auto industry. 

In 2017, there were over 225 million licensed drivers in the United States. Chances are, if you’re reading this blog, you are probably one of them! This number increases with every passing year, as the need and desire to drive grows. 

Like every other industry we have written about so far, the auto industry has not been spared from COVID-19. Everything from manufacturing, to exporting, to sales have been disrupted due to the global pandemic. Even the ways that people are shopping for cars are changing too. This week, we are going to take a look into just how the coronavirus has affected the auto industry. Then we’ll make a few informed predictions as to what is next for one of the biggest industries in the world. 

Understanding the Auto Industry 

The auto industry is absolutely massive. According to Vault.com, “The industry is made up of companies and workers who manufacture and deliver cars, trucks, and other vehicles to companies that sell them. Companies in the auto industry fall into one of two primary segments: car manufacturers and car part manufacturers.”

“Today’s vehicles are more complex and involve many more parts and electronics than in years past. That has led to an increase in the number of parts manufactured by suppliers rather than manufacturers. Additionally, since car manufacturing is expensive, there are fewer manufacturers in the industry. In the United States, there are three leading vehicle manufacturers: Ford, General Motors (GM), and Chrysler. On a global basis, world leaders include Honda, Toyota, Nissan Motors, Volkswagen, and Hyundai.”

Valut.com goes onto point out that COVID-19 has tossed a giant monkey wrench into the auto industry. The “Automotive industry in the US continues to remain fragile. Vehicle sales in August declined close to 20% (YoY), reaching 1.33 million units, despite an extended weekend due to Labor Day falling on a Monday. Total January-August 2020 sales reached around 8.8 million units, down 23%. During the month, Toyota saw a sharp decline of 24.6%, followed by Honda (-23%). Hyundai, on the other hand, performed comparatively better with only an 8.4% decline. Limited inventories and fewer incentives continued to hold back sales.”

To sum these numbers up for you, the auto industry has taken a big hit this year due to the coronavirus and continues to be affected in every aspect of the industry. Like countless other fields, many are being forced to evaluate the current reality that we have come to know, and pivot accordingly to accommodate the global pandemic. 

It’s not just manufacturing, too

Manufacturing and production are two huge components of the automotive industry, but they don’t make up all of it. Auto sales are just as important. Think about the steps that go into buying a car. You will…

• Go to a car lot or, in some cases, the current car’s owner
• Check the car to make sure it fits your criteria
• Test drive
• Go home with your new or used car

Much of this is just not safe in the middle of a pandemic.

We’re now seeing a growh in sites such as Carvana, Cargurus, and AutoTrader, which allow you to shop for a car online. However, to many, the thought of buying a car that you have never been in seems a little daunting. Carvana, for example, allows you to search, and buy right from their site.

Once cars are purchased online, they are delivered to you, where you have seven days to test drive. If you don’t like it, you return it. Easy enough, right?

Time will tell if this trend lasts. Until then, here are a few predictions for the auto industry’s near future.

3 Predictions for the Auto Industry 

1. Production will be slower

After looking at the current year-to-date trends for the industry, it is safe to say that you can expect slower production times for the near future. Plants are not able to function at regular capacity due to social distancing. Plus, many plants will wind up stuck waiting for parts from other countries due to supply chain disruptions. Until COVID-19 slows down, production times for the automotive industry will not speed back up to what they were. 

2. Online auto sales will increase

With an airborne pandemic, it’s difficult to justify person-to-person contact. Mask mandates are still present throughout the nation and COVID-19 cases continue to rise. This puts auto dealers in an interesting position. With many people avoiding contact with other people during this time, I believe you will start to see a substantial increase in online automotive sales.

“In the used car market, Carvana reported a resounding second quarter, with revenues of $1.12 billion and nearly 56,000 units sold – an increase of 13 percent over 2019 – with the number of cars sold up 25 percent year over year. In a letter to shareholders, Carvana Founder and CEO Ernie Garcia said, “COVID-19 has caused all of us to reevaluate our shopping behaviors.

Many people who previously would not have considered buying a car online are giving it a second thought. In a recent CarGurus survey, 60 percent of respondents said they were open to buying a car online versus 32 percent before. We believe this shift is here to stay.” For the sake of car salesmen, let’s hope not…

3. Auto sales will stay low until there is a vaccine

The year 2020 will be remembered for a lot of reasons. Quarantine will be one of them. I know everyone is sick of hearing that word by now – I sure am!

Even still, stay-at-home orders and general safety concerns are reducing people’s desire to travel. Due to people being stuck inside, working from home, and trying to save money to prepare for a rainy day, auto sales will continue to stay low until COVID-19 slows down. 

Final Thoughts 

This year has been a rough one. COVID-19 has taken so much from all of us, and the reality of it will be present for some time to come. Vaccines are in the works, though, and with them society will begin to return to normal. Then, with a renewed sense of purpose, the auto industry’s engines can roar back to life.