Just like every other industry, the auto industry is currently facing an economic downturn due to the ongoing pandemic. The effects of COVID 19 have made major auto companies stop manufacturing cars and other auto-related parts. Thereby causing a severe business model transformation and an unprecedented break in technology and car designs.
With no light at the end of the tunnel about when all these will come to an end and the lockdown restrictions will be lifted across the world, the effects of this pandemic will continue to ravage the auto industry.
To give you a better insight as to what is at stake. Right here, we will be sharing the major defects of COVID 19 on the auto industry. These effects go beyond just the economic downturn, but also the accelerating decrease in market capitalization which has put many key players at the risk of going out of business if this pandemic prolongs than assumed.
1. Limited Supply of Vehicle Parts
China, USA, Germany, and other industrial nations been the most severely hit by the coronavirus pandemic, auto industries across these regions are on a complete lockdown to help curb this virus that spreads like wildfire. As a result of this, there has been a sharp decline not only in yet production of cars but also that of vehicle parts.
Also, the trade restriction across different countries as a result of border closures across the globe has reduced the availability of vehicle parts and create limited distribution among car owners who need to repair a thing or two in their cars.
2. Drop-in New Vehicle Sales
On the side of businesses that are involved in the sales and dealership of cars on both a commercial and retail level, the ongoing coronavirus pandemic has drastically reduced the sales of new vehicles. Thereby making it very difficult for their businesses to survive and generate revenue.
Also, this has increased the prices of available new cars. Making it quite expensive for people who intend buying. In turn, this will decrease the number of sales of new cars because people can’t afford them.
3. Shut down of Manufacturing
COVID 19 has also put many OEMs on a bad side, forcing them to shut down manufacturing as a result of the reduced workforce, scarce raw materials, and economic uncertainty. The effect of this has no doubt reduced its revenue and individual market share.
4. Declining Working Capital/ Liquidity
Due to the decrease in cash flow across the auto industry and the increasing drop in demand for auto parts and new cars, auto companies are beginning to experience a deficit in managing their short-term liabilities which includes payment of salaries. If this pandemic continues for more than 6 months, auto companies will be left with no other option than to lay off their employees. If you are based in Dubai and are having hard time selling your car you can visit cash your car and car sell zone .