ACCENTURE APRIL,7 2020
Faced with falling sales, global political uncertainty, carbon dioxide fines and rapidly changing customer demand, most automakers have been facing a perfect challenge since 2019.
These disruptions have created unprecedented uncertainty. The changing market makes predicting the recovery trajectory challenging, especially with respect to the timing of case-related plans.
Covid-19 is disrupting the global automotive value chain. Here are some of the major challenges facing the industry and Suggestions to help solve them quickly:
Because OEMs relied heavily on just-in-time production, their supply chain was immediately disrupted. Nearly two-thirds of car production in China has been directly affected by the country’s industrial shutdown, which has also had a big impact on its suppliers. Moreover, a shortage of parts made in China has had a severe impact on global production.
Although the situation in China is beginning to stabilize, most automakers in the United States and Europe are still not sure when their plants will return to normal production. At the same time, OEMs began to shift engineering, assembly, and even procurement capabilities to produce and purchase medical equipment. Whether the shutdown is due to health and safety enforcement, legislative inaction, a drop in demand or a shortage of parts in the supply chain, the consequences are the same: job losses, a projected 16% drop in auto production, a severe impact on GDP.
Cash is king, and in times like these, cash is all the more important. Some OEMs have low liquidity and minimal operating cash flow, with the average remaining cash reserve running out in less than two months. This led to various OEMs to negotiate higher credit lines. Moreover, the sharp drop in market capitalization could accelerate consolidation. And without additional funding, some players could go bust. This financial challenge will affect transformational investments in connectivity, autonomy, sharing, and electric transportation that may be delayed.
Car companies should respond quickly to these current disruptions. They should consider strengthening operations to prepare for potential risks and adapt to this “new normal”. Crisis control towers can help coordinate these actions.
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