A bumpy road to recovery for Automotive OEM

An overview of the impact of COVID-19 on Automotive industry, changing consumer
preferences, and the Future of Mobility. How will the sector already tackling an ever-transforming mobility landscape react, respond, and evolve amidst this global pandemic?

1. The global footprint of Covid19

We all have seen the unprecedented impact of COVID 19 in our lives. Since the beginning of this unfathomed era, experiencing and adapting to the ‘changing norms of normal’ is a prime showcase of human resilience. While on a personal front, the pandemic has catalyzed a change in a social lifestyle, media consumption, material demands & purchase patterns; on a macro level a trickle effect of this snail-paced economy has resulted in a sectoral slowdown in almost all industries barring a few, that too at a global scale.

The slowdown in 2020 is projected at – (negative) 4.9 percent by IMF. Another report by ADB (Asian Development Bank) predicts global economic losses in line with $9 trillion.

2. Automotive industry aftermath

The automotive industry has been the showstopper of technological advancement for
many years. Smart pods for autonomous public transport and sleek visions of selfdriving cars blaze trail the for the transportation industry. Connected Autonomous Shared Electric: the much-accepted future!
Automotive OEMs were reinventing themselves as mobility service providers when the pandemic rocked the world. Work from home guidelines & minimized social & recreational interactions drastically reduced the need to move. Being one of the worst affected industries globally, OEMs had no choice but to divert R & D and growth funds towards working capital as a survival initiative. The looming debate: Priorities of TODAY vs. FUTURE!

Global car sales dropped by 39% in March 2020 (JATO Dynamics), and almost 100 automotive production facilities globally were closed as of April 2020 (Springer 2020).

3. The curious case of China

Thank you, China! For manufacturing everything, the world could not. And we aren’t talking about Coronavirus here,to be precise!
Automotive OEMs today operate in a partnership ecosystem vastly depending on auto ancillary manufacturers, steel, chemicals & textile producers, fleet & vehicle management, software developers & mobility service providers, amongst others. With recent trade & supply chain suspension, the whole network has been adversely affected. Hubei & Wuhan, the two cities notoriously famous for Covid19, were once renowned for solidifying the Automotive industry’s manufacturing backbone.
The Automotive OEMs are not only alarmed by low demand but are also having to fret over supply chain discontinuity.

Hubei alone makes up roughly 9% of this global production. According to the China Association of Automobile Manufacturers, the Chinese auto market may shrink as much as 25% this year, which before the pandemic had been expecting a 2% decline. EV sales fell by more than one-third in the second half of 2019. (ET Auto India).

4. Foreseeing the pandemic implications

i. Short-term: Setback for Electric Vehicles.

Indeed, the oil market has experienced large shocks during this pandemic. The question here is what the current supply-demand dynamics and consequently, crude oil price collapse tells us about the future of the EV market. Expected scarcity to a sudden reserved abundance of fuel has resulted in an abrupt shift in consumer perspective -the biggest driver of changing demand patterns. Before the pandemic, all major Automotive OEMs were investing heavily in producing Electric Vehicles, the global sales of which is seen to plummet this year continuously. Fleet purchases are caught in the waiting game of newer models suited to the new oil cycle. Experts, however, foresee this as a temporary slowdown, EV trends will pick up in early 2021.

Crude Oil prices fell to – $37 per barrel in April 2020. Global sales of electric vehicles (EV) will drop 43% in 2020 due to the novel coronavirus pandemic and its financial impacts, according to new research (Wood Mackenzie).

ii. Long-term: Transformation of mobility landscape

The most remarkable form of branding is.. becoming a verb! Uber had reached that ultimate infiltration of its customers ’psyche. ‘Ubering a ride to your friend?’ …we all have done that; the question is, will that continue? People have begun to think differently; the way they commute (if necessary!) has changed. Although a very personal choice, this little change in perspective has made a gaping dent in the ride-hailing industry’s growth plans as a whole!
The recovery of this sector goes beyond the economic sphere. Broader societal implications like decreased traffic congestion, pollution, and emissions are also in play. On an individualistic front, transportation entities are burdened with implementing strict hygiene protocols while keeping it affordable. As walking & cycling are preferred at one side, the other end of the economic spectrum is pushing for another dramatic shift: autonomous driving!
Survival has never been so pertinent. Mobility companies are exploring hyperlocal delivery business in partnership with the retail and food industry. As far as today, this seems to be a rewarding bet amidst declining & concerned ridership!

Public transport is still not operational in many cities globally, and where they are operating, they have seen a steep fall in ridership (70-80 percent). Ride hailers also have experienced declines of up to 60 to 70 percent, and many micro-mobility and carpooling players have suspended their services.

5. OEM evolution & recovery Post COVID 19

It is a tumultuous time for the automotive industry. The landscape mentioned above is driving massive shifts in consumer expectation & mobility offerings. Declining sales have forced the industry to pivot in a manner to appease the new age customer with a digital omnichannel sales experience.

• Pre-sales: A connected offering that delivers much more than just mobility to indulge the end customer. Refer our last blog – 8 Industries being transformed by Connected Car Data. Special offers and flexible contracts always add the spark.
• Sales: A contact-less sales experience with app-based test-drive model, emeetings with vehicle specialists, and VR led driving simulations.
• After-sales: Automotive OEMs & Dealers need to Adopt a hygiene-centric process and design changes like sanitization/fumigation of the vehicle as part of workshop services.

Business disruptions & uncertainty in jobs have influenced purchasing decisions & future mobility choices. According to Capgemini Invent research, 54% are planning to postpone their planned car purchase in 2020.

6. How Airlinq can help in Digitization journey for the OEM

At Airlinq, we believe, connected ecosystems of tomorrow will present tremendous monetization opportunities for automakers while building numerous new avenues for customer engagement.
Airlinq enables Automotive OEMs to offer infotainment, safety, and utility services inside the vehicle for new streams of digital revenues and enhancing the customer experience. API orchestration enables seamless onboarding or third-party service providers and the creation of a monetization ecosystem.
Fleet optimization enables Automotive dealers and fleet owners to schedule on-demand test rides and customer visits to ensure a contactless experience. Airlinq Edge solutions enable V2X (Vehicle-to-Everything) use cases for the Automotive OEM paves the way towards a future of autonomous driving.

To know more, please visit: https://www.airlinq.com/connected-car-platform/