Automotive Industry: Re-Structure the Future Post COVID-19

Pandemic has taken operations by storm across every industry. Over the years, the automotive industry has faced significant challenges, including a decline in sales and emission penalties by governments worldwide, among others. The COVID-19 outbreak intensified these conditions, further disrupting every level of the supply chain process.

Nevertheless, in recent times, several global manufacturers have undertaken multiple R&D activities to adopt innovative technologies to improve sales and enhance customer satisfaction. Given the unprecedented scenario, the question stands, of how can automotive companies recover and emerge more decisive in the years ahead?

Impact of COVID-19 on the Flow

With the outbreak of novel coronavirus, a series of lockdowns were initiated across countries, which significantly brought the world to a standstill. This not only impacted economies, but also led manufacturers to halt their automotive production. In such a scenario, manufacturers are compelled to work towards innovative strategies to recover from the significant revenue drop experienced in the past several months.

  • Interruption in the Supply Process: One of the major setbacks that the industry witnessed was the disruptions in the supply chain process, making it difficult for OEMs to move ahead. Since China was the epicenter of the virus outbreak, the dearth of Chinese-produced automotive parts negatively impacted global production. In such a scenario, the implementation of smart systems and big data to assess risk and prepare a new plan of action helps curb heavy losses.
  • Sales Decline: The nationwide lockdown in several countries inevitably led to a large drop in automotive vehicle sales. This failure in the traditional sales process proliferated e-commerce platforms. In fact, among automotive companies, the need to remodel their sales process by connecting with customers through virtual platforms, gained momentum amidst rising COVID-19 cases.
  • Shutdown of Manufacturing Units: The automotive industry is quite large with several production levels, which was majorly impacted, leading to the shutdown of several manufacturing units across the globe. In China, the situation has stabilized, but it is still uncertain in multiple countries when the workforce in these units will reach its full capacity for carrying out efficient production processes.

The pandemic outbreak has pointed towards the inefficiency and rigid business model of the automotive industry, which needs to be reimagined to recover heavy losses incurred and avoid any such future shocks.

Futuristic Technology: A Step towards Resilience 

In the recent past, several prominent automotive companies have begun their electric vehicle production to comply with several government norms to reduce carbon footprint. Even though numerous automakers have been developing and introducing their line of electric vehicles, they still depend heavily on conventional vehicles to gain profits. For instance, key market players are investing in autonomous systems with an intent to shift towards a more digitalized business model. However, a large amount of investment remains in the research and development of traditional vehicles.

Automakers require a significant push to deploy software in implementing autonomous systems in vehicles and sales processes. In fact, with substantial operations shifting online, the deployment of track and trace solutions helps in tracking the flow of automotive parts from the manufacturer to the end-user, reducing the threat of in-transit theft and maintaining records promptly.

Another essential aspect to consider for automotive companies is to rebuild themselves through effective and innovative business models, such as creating new greenfield business in the wake of rising environmental concerns. Rather than improving dealerships, the companies can evolve by launching an innovative digitized sales platform, focusing on timely customer services and last-mile delivery.

Steps to Move Forward

  • Shift towards Online Sales Platform: Everyday consumers shift their preference towards online platforms to engage with multiple industries. Moreover, numerous consumers are likely to use online platforms even after the pandemic recedes. Hence, automakers can gradually benefit from shifting their sales process into a more digitized and virtual manner to recover their losses. For instance, companies like Mercedes-Benz have turned their sales to online portals to boost sales.
  • Embrace AI and IoT Technologies: Not only the digitization of the sales model, but the practical step towards deploying artificial intelligence and machine learning technologies in developing new autonomous vehicles can help the automotive industry regain its strength on a global scale. Further, IoT-based concepts can help companies prepare effective shock protocols, while enhancing their efficiency.
  • Cashflows Maintainance: Due to the virus outbreak, it became tough for companies to maintain smooth cash flow. In such a case, consumers are highly concerned about making large up-front purchases. Moreover, they prefer short-term disbursements, which automakers can fulfill by maintaining close contact with banks to attest credit lines and offer effective payment models.
  • Strategic Partnerships: For OEMs and suppliers, investments in autonomous technologies, connectivity, electrification, and shared mobility (ACES) are significant challenges. During a time when these solutions are required to be implemented, companies can gain by collaborating rather than competing. Above all, the cost-cutting measures impact investments in technological advancements in the industry, making partnerships all the more necessary, even after the post-COVID-19 crisis.
  • Focus on Software R&D: Long before the pandemic hit the automotive industry, the large number of R&D budgets experienced a series of cuts, with multiple companies lowering expenditure by more than 20%. In fact, various projects were laid off or delayed, including new powertrains and operating systems. With cars developing to be electrically-powered with autonomous driving abilities, there is a need for R&D activities, focused on software solutions than hardware solutions. Software solutions primarily hold the ability to reduce hardware complexity, making it more standardized shortly. Above all, the concentration of software solutions has the potential to decrease R&D costs.

Transforming the flow

For large automotive companies, the step towards re-shaping their operations is not an easy task. These changes have been challenging the industry flow for the past several years, and with the pandemic outbreak, it will be a long road ahead. Nevertheless, automakers are taking up new methods to work their way towards a profitable future. For instance, OEMs have moved their engineering, assembly, and purchasing abilities towards producing and sourcing medical equipment.

In the changing industry landscape, companies must focus on digitalized sales systems and R&D activities with a digital focus, among others. It is quite clear that the automotive industry’s future will be electric, digitalized, and autonomous. Hence, automakers need to level up and adopt novel models to reach their anticipated growth, while forming a blueprint to avoid future shocks.

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