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McKinsey & Company: The impact of COVID-19 on future mobility solutions

As the global pandemic spreads, mobility players need to prepare for the new world ahead

As the COVID-19 crisis rages, public life in many countries is grinding to a halt. The human toll is enormous, with the patient caseload and deaths increasing exponentially worldwide. On the economic side, the coronavirus has forced many businesses to cease or slow down operations.

Automotive OEMs and players within the mobility industry are among the hardest hit. Over the long term, COVID-19 could have a lasting impact on mobility as it drives change in the macroeconomic environment, regulatory trends, technology, and consumer behaviors. The trends may vary by region, however, so responses and outcomes for mobility players will differ by location.

Macrolevel weakness could spur consolidation among mobility players

The current crisis stands to be the most abrupt shock to the global economy in modern times. As with other financial contractions, people will postpone discretionary purchases and increase their savings as they anticipate harder times ahead. According to recent McKinsey research, discretionary consumer spending may decline by 40 to 50 percent, translating into a roughly 10 percent reduction in GDP and numerous second- and third-order effects.

The most immediate and visible effect of COVID-19 in the traditional automotive sector is the standstill of many OEM and supplier factories, which will likely produce 7.5 million fewer vehicles in 2020. At the height of the crisis, over 90 percent of the factories in China, Europe, and North America closed. With the stock market and vehicle sales plummeting, automakers and suppliers have laid off workers or relied on public intervention. Many have secured capital by either applying for government assistance or seeking investor money, while others have extended their credit lines and suspended dividend payments.

Mobility players are also suffering. Public-transit ridership has fallen 70 to 90 percent in major cities across the world, and the operators are burdened with uncertainty and the potential need to implement and control strict hygiene protocols—such as compulsory face masks and health checks for passengers, or restricting the number of riders in trains and stations to comply with space requirements. Ride hailers have also experienced declines of up to 60 to 70 percent, and many micromobility and carpooling players have suspended their services.

Some governments have launched initiatives to support mobility start-ups that were hit hard by the crisis, but low cash reserves and a lack of capital in the market will most likely take their toll on many players. Just recently, a scooter-sharing start-up laid off over 400 employees (30 to 40 percent of its workforce).1 The potential weakness of some players, combined with the availability of still-cheap money, could trigger a surge in M&A activity in the mid term, leading to a long-predicted industry consolidation.

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SOURCE: McKinsey & Company

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