Is there a real threat of a collapse of the automotive market?

The automotive market is one of the largest industries in the world, and it has been facing many difficulties for a while now. This year, there are two major challenges that have come to light: COVID-19 virus and Brexit. The first challenge is already causing a serious disruption in production capacity, as factories are forced to shut down due to lack of demand. 

COVID-19 virus

The first challenge is COVID-19. Data analytics in automotive pointed out, the collapse in demand for new cars and disruptions in supply chains as a result of the coronavirus resulted in interruptions in the operation of automotive factories in Europe. They pointed to the estimates of the European Vehicle Manufacturers Association (ACEA), which show that by May 2020, approx. two million four hundred forty six thousand vehicles were not produced due to this pandemic, which constituted approximately 15% 2019 passenger car production. This led manufacturers such as Ford or Jaguar Land Rover to announce planned closures for several weeks during April and June because they did not have enough parts from suppliers who are also affected by COVID-19.

Brexit

The second challenge is Brexit. This deadline will likely cause an even greater disruption when it comes into effect on March 29th. The UK automotive industry has been one of the most vocal sectors in warning about the potential effects of a no-deal scenario, which would mean that production lines and supply chains would be disrupted for British manufacturers – from carmakers to suppliers – as well as EU producers exporting cars or components to Britain. In addition, if tariffs are imposed after this date, they could make some models less competitively priced than competitors’ vehicles manufactured elsewhere in Europe. It might also lead to higher prices for imported parts due to duties introduced by the European Union (EU) government and other regulatory changes such as customs checks at the borders.

Are there any signs of improvement on the automotive market?

The COVID-19 virus has been a major factor in the automotive industry’s recent challenges, but there have been signs of recovery. Manufacturers are having a difficult time with parts supply and higher costs as they are forced to rely on suppliers from other regions in Europe to make up for production they suspended. Despite this, car sales in Europe are still at record levels: for example, the market in Spain was at 2.7 million this year, which is the highest level since 2007. The automotive industry is not only looking at its own challenges; this sector depends heavily on trade with other countries and a no-deal scenario could have serious consequences not only for British manufacturers or EU producers exporting cars or components to Britain but also on Japanese companies.