Updated: Jan 18
Automakers Struggle, Top Players Expecting 20% Sales Drop
The yearlong complications under COVID-19 brought devastating impacts across the global economy, crippling both supply and demand in the market. Global automakers were not exempt from the unforgiving year of 2020, experiencing a sharp decline in sales with analysts at Counterpoint estimating a 20% annual sales drop.
The fact that the bulk of the manufacturing plants for automotive parts (i.e. Gestamp) were concentrated in regions heavily affected by the early stage of the COVID-19 outbreak did not help automakers cope with the already discouraged market demand caused by travel restrictions. Recurring COVID-19 spikes and confusion led up to massive supply chain shutdowns throughout the region.
Global automakers alike experienced difficulties in managing their supply chain due to this phenomenon. Volkswagen experienced a shortage of semiconductor chips due to this exact reason, resulting in a severe production bottleneck. Jaguar LR's plants in the UK were outright shut down and were unable to resume production for some period. Similarly, Daimler's production plants in the Americas were closed down one by one; because of "lower sales volumes and significantly reduced production volume," Daimler struggled with a net loss of 1.9 billion euros in 2020 Q2.
Searching Beyond COVID-19
While COVID-19’s destructive influence over the performance of global automakers is evident, an early critical projection from Euler Hermes preceding the pandemic on the 2020 automotive market might be an indication of a separate, underlying problem plaguing the sector. The report estimated an 11% and 3% decrease of EBITDA of the top 25 global automakers in the year 2019 and 2020 respectively, listing higher price competition, downward pressure on margins, and the threat from alternatively powered vehicles (e.g., electric vehicles, fuel cell vehicles) as contributing factors. Last year’s article from McKinsey & Company also mentions how the shifting trends within the automotive industry threatened the sector even before the pandemic took place.
Taking this broader context into consideration, it is within the realm of reason to suspect that the pandemic was merely a catalyst that amplified the existing pain points of global automakers, the root cause being their fragile supply chain management. And while auto-industry professionals in procurement, industry 4.0, manufacturing, production, and supplier management struggle to search for answers, they are starting to take notice of the importance of supply chain resilience and new technology application to the global plants.
Questions To Be Answered
According to Deloitte, "automotive manufacturers are taking a hard look at the resiliency of a globally integrated supply chain brought to its knees by parts production disruptions in China even before the coronavirus spread around the world."
Most of the initial complications from the COVID-19 fallout was due to supply plants shutting down in heavy-hit regions like China, where OEM clusters used to flourish. Automakers relied heavily on those regions: cost-effective and logistics stable, resulting in no pause on the supply. COVID-19 changed everything; human resources were at risk, increasing management cost. Delivery stopped, and parts were stuck at the port. The majority of business communication was disrupted due to lockdowns. Automakers were unable to track and manage the parts like they used to do before the fallout.
Faced with these challenges, global automakers were forced to acknowledge problems stemming from their lack of data management and data transparency in terms of supply chain management; now they have some fate deciding questions to be answered.
- How could we increase supply chain resilience?
- How could we track the location of the parts?
- How could we supervise and manage our supply chain?
- How could we easily communicate with our suppliers?
Road to Recovery: Resilience Through Tooling Digitalization
"...We have to adapt our business operations to a new reality and a new normal. And we have to continue investing in the transformation topics such as electrification and digitalization.”
says Källenius, Daimler CEO.
The value of using digital tools to solve customer pain points is something many global companies understand at this point, but the importance of addressing the supply side pain points is still often overlooked.
According to Deloitte, the automotive industry can begin its recovery process by digitalization: especially its tooling. Digitalization from your footholds, not only your end-products, is crucial:
By digitalizing their most fundamental manufacturing process, automakers can gain control over the risk factors and take initiative in their future business planning, ultimately bolstering the company value.
Samsung Electronics' Choice of Digital Transformation
Tooling Digitalization experts at eMoldino provide professional insights on how to increase supply chain resilience and reduce manufacturing costs by providing end-to-end solution on mold and dies.
Our device collects data like location, shot count, cycle time, and temperature, making automotive companies easy to track the manufacturing environment, manage potential risks on molds failing or supply shutdown -- which leads to considerable cost reduction. The data is transferred to analytics cloud-based platform, securely managing the data and enabling smooth communication with OEMs and suppliers. Our development team is also working on implementing AI and machine learning to the data and the platform; all these efforts would ultimately increasing company net value by participating in an industry 4.0 wave.
Industry giants like Samsung and HP have applied eMoldino's solution in their supply chain of mold and dies and have seen the benefit of tremendous cost reduction and risk management during the need of urgent cost cut during COVID-19.
Ask for a quick showcase of our delivery-monitoring analytics; see how we create value for top-tier manufacturers worldwide.
If you are currently occupied but would still want to get customized insight for automotive industry from us,