Virus Disrupts Car Sales, Production, Margins, Suppliers, & Future Customer Attitudes

SITUATION:
Car Sales expected to be down by fifth or 20% for 2020; Eight OEMs survival depends on burn rate of $50B cash, supply chain capacity, and debt management to avoid default; Labor shortages caused by Coronavirus stay-at-home outages;

SIGNIFICANCE:
Government assistance being sought; $60B EV investment and new technology provides hope of sales and customer interest. Factories are re-opening and pooling of resources is going on; . Taxpayers to prop up weaker companies with loans and tax driven incentives.

SOLUTION(S):
More consolidation of manufacturers, suppliers, and dealer distribution channels is expected; Government loans and bailouts needed; Cash for Clunkers programs may return; EV production by Tesla, Toyota, and VW will lead the way. Attitude changes in how car buyers view the need for a new vehicles including EVs will be critical. How people move about may be to commute and use alternative ways to do so. More consolidation and alliances to pool resources.

STATS:
20% expected lost sales caused by Global Pandemic ; Burn rates of $10B ti $14B by GM & Ford; 25% of auto parts makers to have cash shortfalls;

SAYS:
“The Industry is running on two clocks” [Short term – Investment in Fossil Fueled vehicles; Long Term: Keep selling EVs in spite of battery prices] — Dan Levy, Credit Suisse

SOURCE: The Economist April 25th article, “From 60 to Zero” ; https://www.economist.com/briefing/2020/04/23/the-worlds-car-giants-need-to-move-fast-and-break-things

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