Covid 19 and the Car Industry, Part Two

In Part One of this article, we looked at how the Covid-19 pandemic had impacted on the car industry. In our concluding part, we look at how the industry must adapt to survive.

If you don’t have five minutes to read Part One, here’s the more-than-slightly depressing summary: Covid-19 has hammered the global car industry. Sales have plummeted, companies are burning through cash reserves, the supply chain has been in bits and factories are struggling to find ways to bring workers back in safely.

So that’s all horrible, then.

But let’s step back a bit. Covid-19 doesn’t change the fact that globally, cars are still the dominant mode of transport. There are 1.4 billion cars on the planet and a fair proportion of those will need replacing in the next few years. And as the fractured economy slowly heals, more people will be in a position to buy. The car industry is far from dead, and though it may not return in its old form, it will be back.

Is there anything the car industry can do to speed up its recovery? Quite a lot, actually. Based on our research, we’ve picked out four ways we think the car industry could adapt to its latest challenge:

1. Fix the Supply Chain

The coronavirus pandemic showed just how fragile the car industry’s supply chain really is — and how dependent it is on China.

China has been the world’s major supplier for automobile parts for some years. Not surprisingly, when the country went into lockdown early in the year, the supply chain fell to pieces.

With the distinct possibility that the pandemic will be back for a second round, experts consider that manufacturers need to reduce their reliance on Chinese exports. They also need to build in more contingency plans for future disruptions.

2. Develop Cars with Covid-19 Safety Features

It may not be feasible to build a completely Covid-19-proof car, but it might be possible to add features that reduce the risk of transmission. It’s not as far-fetched as it sounds. Counterpoint Research reports that several major manufacturers are developing infection-reducing systems. These include:

  • An “Intelligent Air Purification System” to stop pathogens entering the car from outside.
  • Self-cleaning, anti-bacterial surfaces for the highest-touch areas.
  • Sanitising UV-C ultraviolet light units which can destroy pathogens. Airlines are also racing to develop similar systems.

If effective, these infection-reducing features could become a major selling point for new models. Potentially, that could provide a substantial boost for new car sales.

3. Go With the (Green) Flow

Before the pandemic, electrification in the car industry was already increasing in leaps and bounds. Could Covid-19 have speeded up that trend?

There are at least three reasons why it might have:

  • With public transport a risky proposition, there’s an increased need for practical urban vehicles.
  • Many major cities have been widening pavements, adding cycle lanes and making dozens of roads car-free, making ownership of a large FFV (fossil fuel vehicle) even more impractical.
  • Scientists are discovering links between air pollution and Covid-19 mortality If this is confirmed, this may further strengthen the public health argument against FFVs in cities.

On top of that, many city-dwellers have enjoyed better air quality during lockdown, and only 9% of people want things to ‘return to normal’.  Time will tell, but that brief glimpse of clear skies could translate into an increased demand for electric vehicles.

So, it seems as though everything is pointing manufacturers in the same direction. The urban market is ripe for a cheap, fast-charging, super-compact electric car. VW Group already has the Skoda e-Citigo (and its stablemates from Volkswagen and SEAT), but the marketplace is not exactly saturated. And with reduced spending power across the globe, £50,000 electric saloons are starting to look irrelevant.

In our view, the industry might recover faster by building the type of electric cars that people need — and can afford.

4. Learn from Tesla

Speaking of electric cars, the car industry knows it has to learn from Tesla.

Love them or hate them, the California-based company has some innovative approaches, and these have paid off over the last few months.

For example, the height of the UK lockdown, Tesla was the only car manufacturer making any real sales. During April, the Tesla Model 3 became Britain’s best-selling car as electric vehicles captured 34% of the market. Now admittedly, the overall numbers were tiny, with just 658 Model 3s sold. But the point is that Tesla weathered the storm better than its older and more established rivals.

Essentially, Tesla has done away with the traditional model of dealerships and forecourt sales. Although there are showrooms, they are typically located in shopping malls, where they showcase the cars. They are there to inform and persuade, but not to sell. Instead, all sales take place online and the car is then delivered to the buyer’s home.

This model not only saves on franchise costs, but gives Tesla direct access to customer feedback. It also aligns with a world that’s increasingly comfortable with making large purchases online.

Some industry experts see the ‘Tesla model’ as a key way for the car industry’s recovery. According to Michelle Krebs, President of the Society of Automotive Analysts:

“They’re doing what customers have been demanding all these years. The ones who are doing best have already adopted online sales or quickly adopted those tools and shifted to pickup and delivery for sales and service. We think that will be the way of doing business going forward.”

(See forbes.com)

Adapt and Survive

Despite the doom and gloom in Part One, the car industry will adapt and survive. ‘Peak Car’ may be behind us, sales may be down, but don’t hang up your driving gloves just yet. The car industry will be back — smarter, leaner and probably greener.

The Welsh VW Specialist blog covers a wide range of automotive topics, from the contentious to the light-hearted. We are an independent garage specialising (as the name suggests!) in all the VW group marques, including Audi, Volkswagen, Skoda and SEAT. Welsh VW Specialists provide services, repairs and MOTs, delivering a main dealer level of care at affordable prices. To book your vehicle in, or for any enquiries, get in touch.