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Freeman Cebu Business

Weak market interest puts pressure on auto industry

Ehda M. Dagooc - The Freeman

CEBU, Philippines — The automotive sector is facing more pressures as the threat of weaker market interest is seen to linger.

In a report published by Accenture, which tackled on Covid-19 “Impact on the Automotive Industry,” it warned players that the pandemic places an even more pressure on the industry.

According to the report, the automotive industry is disrupted by the four mega trends; connected, autonomous, electric and shared driving, causing an unprecedented technology and business model transformation.

Amid this transformation, the COVID-19 outbreak is putting additional stress on the industry.

After initial supply and manufacturing disruptions, the industry is now experiencing a demand shock with uncertain recovery timeline due to shelter-in-place regulations.

With limited room to cut fixed costs, some OEMs (original equipment manufacturers) low liquidity to power through a long period of missing revenues.  Decreases in market capitalization will likely accelerate industry consolidation and without securing additional funding, some players risk going out of business.

Meanwhile, changes in customer behavior, such as different mobility preferences and online shopping expectations, might remain after the crisis.

To deal with the disruption, the report suggested that businesses need to execute actions over three timelines: fast response to navigate the emerging situation with a focus on protecting people; a reset of current business activities to adapt to new financial realities; and a renewal of strategic plans to emerge stronger after the crisis.

According to the report, in many respects, the automotive industry is essential for the global economy and the resulting prosperity.

It is a critical component of economic growth with extensive interconnections to upstream (e.g. steel, chemicals, textiles) and downstream industries (e.g. repair, mobility services).

The current economic slowdown is hitting the industry hard and fast.

Mastering the key industry trends, such as digitalization and electrification, continues to be essential for survival in a post-crisis world.

Transformational projects should be continued or suspended rather than cancelled.

Although it is currently a difficult time, the OEMs that are able to mobilize their COVID-19 response and take swift actions will be in a better position post-event and more resilient going forward, the report noted.

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