Study Highlights Impact of Pandemic on Automotive Manufacture
Study Reveals Material Shortages Add to Microchip Production Worries for Automotive
Ok, so it’s been a couple of weeks since our last “microchip production issues” article. However, it seems that wider issues with other materials are impacting on vehicle production and pricing.
A recent collaborative study from automotive industry experts Cox Automotive and Grant Thornton has looked at the impact of the Coronavirus Pandemic on the automotive industry. The issues surrounding material production features prominently.
As well as the well-documented issues with microchip production, there have also been issues in the supplies of materials such as steel and high raw material costs.
When combined, the automotive production industry has taken a battering, leading to reduction and even temporary pausing of production to allow the supply chain to catch up.
Impact on the Manufacturers
The one thing the report highlights is that whilst the issues are widespread, some manufacturers have faired better than others. Most manufacturers continue to make concessions to adjust to the market.
Just recently, Jaguar Land Rover warned that lead times for 53 model variants were now in excess of a YEAR!
Mercedes-Benz have removed specification features from some models from late June production until further notice in a bid to reduce delivery time delays.
Toyota have announced a 40% cut in worldwide production next month. Instead of 900,000 cars being produced in September, it will now product 540,000.
Impact on the Fleets
The research shows that demand levels have remained high – the issues purely lie around the supply.
For businesses out there – finding vehicles has been a real problem. In a recent Fleet News poll, 95% of respondents said they were experiencing vehicle delays.
The larger fleets were swallowing up huge swathes of the supply – particularly electric vehicles. This meant the smaller fleets were only becoming aware of the issues when they came to switch.
The knock-on impact of this has meant that both new and used car market prices have remained high due to the shortage of demand.
Whilst many manufacturers had to take massive hits and go through extensive cost-cutting, this wasn’t the same across the board.
Tesla, General Motors, Kia & Toyota all managed to make profits in Q2 of last year – as the pandemic started taking hold.
Tesla held off closure of it’s Fremont plant as long as possible and then re-commenced production as quickly as possible.
The report also highlights how some companies such as Ford pivoted their focus to high-value vehicles such as SUV’s and Pick-ups. This helped them turn a $61.bn DEFECIT in Q2 of last year turn into a $2.8bn profit in Q3.
Some manufacturers really struggled however.
Nissan experienced losses of a staggering $94bn and $153bn in Q1 and Q2 of 2020. The Japanese giants had been struggling in the US market before the Pandemic, but the Pandemic really compounded the problems.
However, cost-reductions meant that losses hadn’t been as bad as had been feared. Following further cost-cutting and vehicle volumes returning in Q3, Nissan returned to making a profit.
Honda & Mazda both experienced similar trends, with both returning to profitability in the second half of 2020.
What the report did hold up though is that whilst 2020 was almost unforgivingly tough, it was an extreme set of circumstances.
The knock-on impacts of material shortages at the moment will only be short-term – even if that is another 6-12 months.
Demand is still very much there, and once production levels do return to normal, the automotive industry is likely to be as buoyant as ever.