Has COVID changed the automotive industry forever?

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It’s difficult to think of an industry the COVID-19 pandemic hasn’t impacted one way or the other, but when it comes to the automotive sector, the effects have been more significant than most. As an industry completely reliant on people moving around, global lockdowns, social distancing, travel restrictions and office shut downs have naturally done car makers no favours.

With a disastrous 2020 in the books and an uncertain 2021 up ahead, the question for many in the industry is whether the legacy of the pandemic is a long term one. While it’s been going on, there’s undoubtedly been huge changes within production, organisational approach, and the nature of retail, but are those adjustments here to stay?

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Economic and operational turbulence causes an acceleration of growth processes

The economic damage of 2020 is hard not to notice. For the 20 leading OEMs in global auto, the COVID-19 effect manifested in a nine-figure loss in profits. Meanwhile, in labour terms, manufacturers had to act drastically, with 95% of German manufacturer workers put on short-term working contracts during the pandemic.

The mass drop in demand over the period did however force a change that was due in the industry. For example, the effect of the remote workforce, was, while massively damaging in the immediate for manufacturers, an internal success. Companies enjoyed better productivity from their staff in WFH arrangements and enabled organisations to improve communication and transparency within their framework.

Likewise, the growth of e-commerce adoption within the industry has seen it catch up to other areas of retail that were already fit to accommodate the growing consumer appetite for online sales.

The acceleration of many key growth areas and challenges to existing operational models in the sector is something that is set to be a lasting change in the industry. While these changes were due to happen at some point, there’s no doubt coronavirus was the factor that made such drastic internal reviews happen in 2020.

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EVs head up significant disruption

The continued growth of the electric vehicle (EV) heads up a number of key disruptors in the automotive sector in 2021. While EVs, alongside concepts like driverless cars, ridesharing and automated production, were already part of the picture for auto entities, the stalling of the traditional production market in 2020 has only sought to enhance these disruptors further.

The EV market continued to grow in spite of the pandemic, allowing it to gain further traction on the standard combustion market. With the 2030 petrol and diesel ban not lightyears away, the transition to EVs is undoubtedly a gradual process influenced by a number of factors. However, if there was an impact from the pandemic in this regard, it was only to help that cause further along.

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A changing consumer attitude – but for how long?

According to RSM’s Global Automotive Sector Leader, Lawrence Keyler: “The consumer narrative for purchasing a car has changed dramatically over the past twenty years. What originally was a purchasing decision driven by practical function is now one led by emotional and technological aspects.”

That’s all undoubtedly still true, but the logistical impact of the pandemic has sought to reshape consumer attitudes back towards practical function, however not in the regard the industry would like. The rise of the remote workforce through this period has seen the everyday use of cars shift and drop significantly for many drivers.

This factor, combined with an increasing interest in sustainability, also encouraged by the pandemic, has caused a general rethink in the future need and use for our cars, which has seen auto demand drop off immensely in the immediate.

How long this will last is another question. The pandemic, while producing a number of factors that have sought to slow down the car industry, may also leave some positive legacy notes.

For example, the expected increased focused on the likes of social distancing in the future may dissuade people from communal travel and back into their own cars. Sustainability factors, although not good for the combustion market, will only enhance the growing EV market further.

So, has COVID changed the automotive industry forever? The answer, to a degree is yes, but more specifically, the societal, financial and practical impacts of the pandemic have really just accelerated growth changes that were already set to happen in the industry regardless.

However, with many of those changes possibly long overdue, that impact should not be understated.

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