State of the automotive industry
Faced with declining sales, global political uncertainty, CO2 penalties, and rapidly changing customer demand, most car manufacturers have been facing a perfect storm of challenges since 2019—which are mainly driven by Connected, Autonomous, Shared and Electric mobility (CASE). These circumstances have only been exacerbated by the onset of COVID-19, a global pandemic that is affecting every aspect of the automotive sector —from parts suppliers all the way to dealers.
These disruptions are causing unprecedented uncertainty. Continuous changes in the market make it challenging to predict the recovery trajectory, and especially the impact it will have on the timeline of CASE-related initiatives.
Challenges brought on by COVID-19
COVID-19 is disrupting the global automotive value chain. Here are a few of the key challenges facing the industry, as well as suggestions that can help quickly address them:
1. Disrupted supply chain
Since OEMs rely heavily on just-in-time production, their supply chains were immediately disrupted. In China, almost two-thirds of auto production was directly affected by the country’s industrial shutdown, which had a large impact on their suppliers as well1. Furthermore, the shortage of Chinese-made parts has had a heavy impact on global production.
How to manage now:
- Evaluate the risks and create full transparency by using big data, intelligent systems and connected ecosystems. This communicates shortages or other challenges to all points along the supply chain so they can prepare, adapt or adjust accordingly.
- Mobilize a command center to orchestrate the response and configure the risk response. And all the while, operate with agility.
- After the crisis, operate risk mitigation as usual: integrate risk mitigation workflows, scenarios and (response) protocols into daily operations to quickly switch from normal to disruption response if needed.
2. Shutdown of manufacturing
While the situation in China is starting to stabilize5, most of the US and European car manufacturing is under huge uncertainty on when plants will resume normal production. At the same time, OEMs are starting to shift engineering, assembly and even procurement capacities to produce and source medical equipment. Regardless of whether the halts are required by health and safety enforcement, legislative inaction, declining demand or a lack of parts in the supply chain, the consequences remain the same: job losses, a predicted drop of 16 percent6 for the automotive production and hence, a severe impact to GDP.
How to manage now:
- Keep in close contact with your suppliers to ensure a quick ramp-up can occur when the market begins to recover and adjust your production levels and schedule accordingly.
- Consider increasing precautions to ensure workers’ safety, allowing for physical distancing and hiring specialized cleaning companies.
- Embrace Industrial-IoT-concepts to increase efficiency and prepare (future) shock protocols.
- Establish manufacturing resilience to accelerate the shift when ‘emergency mode’ needs to be activated.
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