The Detroit 3 (FCA, Ford, GM) and their international counterparts and suppliers with manufacturing and assembly in North America have started to return to life this week after a two-month lockdown due to the novel coronavirus (COVID-19). The automakers have redesigned assembly lines and added additional training for autoworkers in an increased effort to avoid additional outbreaks of COVID-19 that could throw off production for a second time. Although plants are coming back online, additional precautions are leading to fewer shifts and slower rate of production, which in the near term is exactly what the industry needs to ensure they are making the right models (that consumers want) and not filling up lots with models that will have to be heavily discounted down the road.
As OEMs return to this new “normal” they are seeing that there is no “one size fits all” solution to increase production and demand. Lackluster consumer spending due to rising unemployment and decreased production is causing concerns for automakers as they head into the summer months. Many are relying on government incentives, such as Cash for Clunkers, and other options such as deferred payments and extended payment terms to incentivize consumer spending. According to LMC Automotive, automakers are expected to produce less than thirteen million vehicles in North America, a reduction of over 20% from pre-covid forecast for 2020.
OEMS and particularly their suppliers are in for a bumpy road as we enter uncharted territory for the industry. What we knew about the market, its investments and plans for the future have to be closely monitored and updated to stay relevant. Customer intimacy is key in this environment, with early insights leading to nimble decisions. Fortunately the market was planning for a contraction and had started to incorporate elements for longer term sustainability.
-Abey Abraham, Managing Director, Automotive & Materials
DuckerFrontier’s automotive and materials experts are closely monitoring the impact of COVID-19 on the automotive industry and what the post-pandemic environment will look like. Below are some recent insights and recommendations from our team of experts as the industry begins to reopen:
Opportunities for automotive suppliers:
DuckerFrontier’s Automotive & Transportation team is at the forefront of key trends impacting the industry amid COVID-19 disruptions. Visit our COVID-19 Resource Hub for the latest insights and implications for global business, or contact us to connect with a team member.