April 2, 2020

It is barely three monthssince the first confirmed case of coronavirus (Covid-19) in December 2019. Buttoday, normal everyday life has all but ground to a halt in a growing number ofcountries and we are facing a global economic slowdown. The measuresimplemented by the world’s governments to stop the spread of coronavirus areaffecting almost all industries, and the automotive industry is no exception.This blog takes a closer look at the impact on the automotive sector, andexamines the knock-on effect on the leasing industry.

To prevent further spreadof coronavirus, most car manufacturers are taking a controlled response, suchas by suspending production and putting orders on hold. However, the Covid-19pandemic is just the latest in a series of challenges for the automotive sectorto contend with. After all, the industry has been in turmoil for some time nowas it struggles to cope with several rapidly evolving developments. Forexample, in recent years car manufacturers have had to deal with a shift inconsumers & mobility needs, emerging technologies (e.g. artificialintelligence and automation) and ever-tighter environmental regulations, toname but a few.

5 disruptions to the new vehicle supply chain

All in all, the automotive industryis currently being affected by five disruptions that are having an impact onthe supply chain for new vehicles:

  1. Suspension of production car makers have put their manufacturing activities on hold to protect employee health.
  2. Supply chain disruption more than US$ 34 billion worth of automotive components are normally imported from China each year. Since many factories in China have been severely affected by the coronavirus epidemic, it has been increasingly difficult for car manufacturing plants to obtain the parts they need. Although many Chinese factories are now up and running again, various other countries have since put restrictions in place limiting the movement of non-vital products (including automotive components) across borders. ****
  3. Disappearance of sales channels as dealerships around the world are forced to close in order to protect employee and consumer health, many OEMs are finding themselves cut off from their traditional sales channels. ****
  4. Closure of registration offices non-vital governmental services are also being shut down, making it impossible to register new vehicles. ****
  5. Decline in demand needless to say, there has been a significant fall in demand for new vehicles on the global automotive market.

Thankfully, from the OEM perspective, there is also a silver lining to this situation: the decline in demand is causing a buildup of stock. Although high inventory levels are not always desirable, in this case car manufacturers will benefit from extra agility, enabling them to capitalise on the sudden upswing in demand when the coronavirus situation normalises again

Impact on the leasing industry

For the leasing industry,the shortage of new vehicles will pose the biggest challenge in the short term.To help business owners and fleet managers mitigate the effects of this, weshared a couple of tips in our previous blog (2immediate steps companies can take to reduce the impact of coronavirus on theirfleet). Meanwhile, within LeasePlan, we have drawn up a fullCovid-19 Response Plan to continuously monitor the supply of new vehicles. Inconjunction with LeasePlan's team of experts who are specialized in thechallenging dynamics of today's and tomorrow's mobility market, we arecommitted to ensuring we can adapt to the ever-changing situation in order tokeep our customers as mobile as possible. Ask your LeasePlan contact person formore information or support.

How can LeasePlan help me?

  • Joint review of your situation and analysis of your fleet with: an extra focus on the vehicles on order advice regarding vehicles that are up for renewal

  • Tailor-made proposal

  • Implementation of agreed actions