Coronavirus and the three points of no return for the automotive

One of the fields, which will be more affected from the Coronavirus, is, with any doubt, the heavy industry and, among them, in Europe the automotive.

The whole supply chain is suffering the consequences of a sudden collapse in the final demand; the recovery won’t be immediate at all simply because the EU market is a substitutional one and therefore the demand curve is very elastic to negative external factors.

If we consider that only in Italy the automotive field is worth circa 11% of the GDP we are well aware of what we are talking about and the impact on the entire economy; a well-known fact, which clearly explains the meaning of these words, is the drop in sales of new cars of -85% (-50% in Europe) and of used cars of slightly above – 50% (in March 2020). Obviously, the collection of orders is close to zero as well and, even if there will be a quick recovery, the upswing won’t be immediate.

coronavirus

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Having said that, however, the crisis due to the Coronavirus has underlined three aspects that everyone needs to be reflect upon in the next months, or better days: Environmental impact, Finance and Sharing Economy.

Environmental impact

Impatto Ambientale

Photo by Enokson

With the block on almost all the private transport and part of the public one, the decrease of pollutants agents wasnÕt directly proportional to the block in itself.

In other words, the percentage of pollution, including the increase in temperature too, went from -20% to a maximum of -40%; depending on the pollutants taken into consideration.

This means, as already said several times here in Automotive Space, the impact of transport on pollution has reached values (about 23% of the total) that are difficult to improve with the introduction of hybrid and electric engines only.

Even if we modernized the LPT (Local Public Transport) and promoted the change of cars Euro 0, 1, 2 and 3 we would find ourselves with still high pollutant values due to other factors; therefore, the decrease of some of them implies much more complex energy and investment choices but no longer optionable.

Reviewing the urban heating policy, the creation of intermodal exchanges and the disincentive of territorial movements will certainly have greater impacts than the prohibitive policies of the last decade focused only on the block of traffic and taxation.

Sharing Economy

SHARING Economy

Photo by AnnaliseArt

If there is one aspect affected from the influence of the spread of Coronavirus, and it will affect forever, is the attention to the possibility of infection.

The human history is marked by traumatic events that have changed his habits forever; to remain in the “contagious” area, just think about the most recent cholera pandemic from 1961 to 1975, affecting Italy in 1973.
Many of the habits we now have, not only in terms of healthcare, were originated after that event.

What we are facing now, will lead to loss of the Sharing Economy.

Shared cars, bikes, scooters will be potential vehicles of infection and so a shaky economic project, which cannot be self-financing and wonÕt be able to afford an additional cost of sanitation after each use.

The sharing of company vehicles will have a significant loss too, as well as the sharing of journey between colleagues in the company.

The same is for the public transport; choices will have to be taken to avoid any kind of infection due to the overcrowding.

If the government, the Europe wants to invest in LPT, it will have to be of high quality, ecological, smart, intermodal and “clean”.

Finance

finance

Photo by AnnaliseArt

It is clear to everyone now, even if we widely discussed about it on this professional blog, that OEM and Dealers work in two different areas.

Dealers sell mobility services at 360 ¡ and their investors are the final customers; even the bigger and more complex dealers, when they donÕt have incoming cash flows, are destinated not to have access to credit and therefore to freeze.

OEM are complex industrial realities and need, even more in this decade of excess capacity of the production, financial lungs that allow them to survive also because they are now the only Labor Intensive realities of the Old Continent; from this perspective it is also clear why the government MUST step in.

Dealers need people, small businesses with incomes or prospect of liquidity; economists call it Primary Demand.

OEM needs funds to invest into the R&D or into the Manufacturing.

The positive heritage (of knowledge) that the Coronavirus leaves us, for the automotive sector, is substantially what I have outlined.

There is an operational problem now; will the actors of the supply chain, of communication and of politics be able to rise from their own backyard to trace a path that takes into account these elements as well?

I strongly hope so, the only doubt is that if actors will always be the same, with the same approaches, the new path will be hardly undertaken … But we must strongly work and believe that what is happening to us can really teach us something.

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