Across the Pond

Evans looks at the possible silver lining for the auto sector beyond the current coronavirus pandemic…

There’s no question that the impact of Covid-19 has hit the world like a sledgehammer. And while (as I type these words, at least) the curve appears to be flattening related to the number of documented cases, many pundits are pointing to an economic crisis that’s expected to be even bigger and longer lasting than the health one we’ve already been experiencing. Like many sectors, the transportation one has been hugely impacted and for automakers, certainly stateside, Covid-19 has brought about a drastic rethink of strategy. Prior to the pandemic, politicians and government regulators had continued to apply pressure on automakers to produce greener vehicles. The steady stream of hybrids, plugin hybrids and battery electrics we’ve seen emerging over the last decade were further accentuated by highly publicised Silicon Valley start-ups such as Tesla and more recently Rivian, along with the associated (and ongoing) media propaganda. Additionally, automakers were spending billions of dollars on developing autonomous vehicle technology and promoting new services such as ride sharing and subscription-based models, many of which had questionable outcomes. Today, things have changed drastically. The way in which Covid-19 spreads has ushered in a new era of social distancing and quarantine measures, forcing people to stay home and facilitating the closure of all but essential services for much of the spring season. And while some of these protocols will eventually be lifted, it is unlikely that many people will be willing to jump back into close quarter environments like public transport, especially when in places like North America, it’s fairly rudimentary to begin with. During a recent webinar, I had the chance to listen to one of America’s foremost automotive industry analysts share her views on where this whole Covid-19 thing is going, at least as far as automakers and related businesses are concerned. Her observations (which are echoed by many others) point to a near future, at least, where private car ownership is expected to swell significantly (by up to 14% here in the US, according to some). Many of those people will likely be city dwellers who will dip their toes into the car ownership pool for the first time. Also, a healthy number of vehicle leases are expected to expire this summer, creating a glut of used cars in the marketplace. And with many consumers having been furloughed or working reduced hours, lower household spending is expected to have a very significant impact on the automotive sector and push vehicle prices downward. Additionally, because automakers have (in most cases) suspended vehicle production, there’s likely to be a shortage of new cars for the foreseeable future as well as reduced consumer appetite for spending money on them. With automakers having to tighten their purse strings, many electric and autonomous projects are likely to be shelved, at least for the near future. And with fuel prices at record lows, there’s arguably never been less incentive to purchase an electric car than right now. So what does this all mean? Essentially that larger, safer, used vehicles such as full-size pick-up trucks and bigger sport utilities are likely to predominate the market for some time to come, which will benefit the entire personal transportation sector – from fuel providers to used car dealers, to vehicle reconditioning services, parts suppliers, mechanical repair centres, body shops and financing businesses. After years of OEMs and politicians seemingly trying to do their best to dismantle or at least fracture the automotive industry eco-system by pushing unachievable fuel economy regulations and battery electric vehicles that most people simply don’t want, Mother Nature, in a very unique and almost unpredictable way, has pushed back. And while the economic naysayers point toward doom and gloom ahead, at least for the foreseeable future, it could be argued that Covid-19, by its very nature, has created an environment where affordable, private transportation is expected to thrive for the coming months and possibly the coming years. For the automotive sector, which is a 9-to-1 job multiplier on this side of the pond, this represents a huge opportunity – not only for the industry itself but also those that derive a living from it.