Coronavirus Could have Major Impact on Auto Industry

The Coronavirus has traveled long and far to make it to the U.S. and wreak havoc on many things. Aside from the abrupt increase in hospital stays and unfortunate deaths, this virus also has obviously affected the economy and the automotive industry.

The problems started in China where many manufacturing plants have been shut down since early this year with no production in motion. The risks were too high to have sick workers come in, masked or not, so things came to a fast halt.

A huge result of this production standstill has lead to a parts drought in the U.S. Even if the car parts aren’t from China, most small parts like nuts and bolts are. This trickles down and will eventually have an impact on U.S. production. It isn't definite when the U.S. will feel this shortage, but predictions say that it will be soon if China doesn’t get back up to speed.

Chinese plants are slowly reopening, but the labor force is weakened and decreased. With the slow crawl back into production, the U.S. could feel the effects for months to come. Plus we may soon be seeing our own plant shutdowns if the virus isn’t contained.

So far, the biggest indicator of how the US car economy will be affected is the postponed NY Auto Show, which basically cancels big debuts for an entire model year and halts advancement for new companies like Lucid and Hyperion.

As far as dealerships go, they may see a slow fizzle as well. People are uncertain of whether it is safe to go car shopping during social distancing. Forecasters were already predicting a dip in new car sales for 2020 anyway, and the Coronavirus is only making that more likely.

Fixed Ops will be more important than ever as the falling stock market makes consumers leary of making large purchases.The economy won’t change the fact that cars break down and people get in car accidents. An extra push in advertising and marketing toward service could be a saving grace for dealerships that struggle to sell cars in this uncertain climate. For service centers, customers in need of certain parts for car repairs may be out of luck. The concern is that if a part is needed that isn’t in stock anywhere in the US, then it may be on a slow boat from China, literally.

There will be many updates to come and the hope is that the virus will be contained and make its way out of the picture quickly. But, it is likely that the auto industry and car dealers will feel the effects of this throughout all of 2020. For now stay informed through your state associations, CPAs and attorneys, and stay positive.