The novel coronavirus first originated the city of Wuhan in China from where it made its presence felt across the globe affecting several countries. The virus had a significant level of impact on a number of industries wherein the automotive industry also took an immense hit with sales declining at a significant rate across the globe. The industry is a significant part of the GDPs of ample number of countries like, it accounts up to 10% of the GDP of China, about 6.5% of the GDP of EU and about 3.5% of the GDP of the United States. Additionally, the sector is also big in employment with approximately 14.5 Million people employed in the sector in Europe, about 4.7 Million in China and 8.1 Million in the US, which further highlights the sector. Moreover, China being the origin of the virus, and also a major supplier of the automotive parts to companies globally, the countries and car brands witnessed a rapid fall in the production capacity owing to the disrupted supply chains which restricted the transport of automotive parts. Furthermore, the pandemic also effected the demand side of the market with dealer shops being closed, customers losing confidence, increased fear of buying anything new. The pandemic is expected to have both short- and long-term effects on the industry. Some of the long term effects the industry is expected to witness due to the pandemic are, the loss of customer confidence owing to the ongoing lockdown scenarios in several countries, reduction of funds for the R&D department with revenues taking a dip, increase in the mergers & acquisitions, decisions to exit the market for specific vehicle segments.
The above graph shows the decline in the production of passenger cars across the regions owing to the fact that automotive parts were not transferred to the production facilities because of the disrupted supply chain and also the demand for new vehicles witnessed a rapid decline as well due to the pandemic. Furthermore, according to the data published by the European Automobile Manufacturers Association (EAMA), the sales of the passenger cars in the United States witnessed a dip of 21.1%, whereas the sales of passenger cars in Japan declined by 18.1%.
The trade of the vehicles also witnessed a significant hit from the pandemic across the globe more particularly in the first half of the year owing to a drastic fall in the demand of vehicles on a global level and a major disruption in the supply chains due to the lockdowns that happened in several countries. For instance, the total net worth of the passenger cars exported from Europe fell by nearly 23 Billion Euros as compared to the same time period last year.
Additionally, it has been estimated that the output of the North America region will decline 27% this year. Though the domestic demand has started to come back on track in later months of the second half, the market in the region is still expected to witness gradual growth till the time COVID-19 remains a possible threat.
Similarly, the South America region was adversely effected by the restrictions that took place due to the pandemic. The demand of both passenger and commercial cars declined at a significant rate owing to the threat of the virus and also the lockdowns that took place in several parts of the region. It was until the mid of July when the production plants were allowed to operate with certain restrictions due to which the region is estimated to witness a significant decline of 26% in the production as compared to a year ago.
According to the European Automobile Manufacturers Association, the region of South Asia is expected to witness the most significant impact of the pandemic owing to the rapid increase and a widespread of the virus in the region. The countries in this region had to go under strict lockdowns due to which the production in the region is expected to decline by 36.4%.
The market for the Japan and South Korea witnessed a significant dip in the production capacity in this year due to which the estimated decline in the countries is expected to be 18.5% owing to a significant fall in the demands of vehicles across the globe.
The market study of the impact of COVID-19 on the automotive industry is based on the car sales and automotive parts sales and connected car technologies.