How COVID-19 is changing the automotive industry

Tuesday 20th April 2021

Restrictions on movement and social distancing rules have presented significant challenges for the automotive industry. Let’s take a look at what’s happened so far and what we can expect to see going forward.

 

Environmentally

Delayed CAZ/ULEZ and changing work patterns reducing costs and emissions

The Department for Food and Rural Affairs (Defra) has confirmed that they don’t expect any Clean Air Zones (CAZ) to launch this year and that permission has already been granted to the city councils in Leeds, Birmingham and Bath to delay the launch of their Zones until January 2021.

This understandable development may be a setback in the government’s attempts to meet air quality targets, but it does at least give fleet operating businesses a bit more time to prepare.

It’s also worth noting that the changing work patterns enforced due to social distancing, and the rapid growth of video conferencing as viable method for conducting the majority of business meetings, could mean that we are less reliant on enforcement policies as CAZ and ULEZ than we thought.

 

Financially

Lower second-hand values and restructured insurance models

Whilst it is far too soon to put together a serious evaluation of the true impact on the UK economy, it is widely accepted that the number of new car registrations is a pretty good gauge of market stability. With this mind, the news that March saw a slump of 44% in new car sales is clearly concerning.

It has also been reported that car insurance companies are set to lose £98m and that the pay-per-mile market is a clearly losing out due to people being restricted from travelling freely. Conversely, the drastic reduction in miles driven will have a direct impact on the number of claims made, helping to balance out some of the shortfall in new car premiums.

Looking forward, we may also see a reassessment of traditional insurance models and typical premium levels to bring them more in line with changing mobility needs.

 

Operationally

Less readily available vehicles/parts with new delivery and collection processes

The unprecedented shutdown of car plants around the world has created gaps in vehicle availability. In the short term, this may be alleviated by the release of stock vehicles which have not yet made it to their intended markets or are simply parked up unwanted due to plummeting demand.

The availability of key parts and components could also mean that repairs take longer to complete, with the average downtime per vehicle costing some businesses up to £800 per day. The level of unexpected repairs could also rise as non-essential maintenance is deferred due to financial pressures or garage closures.

It also seems likely that we will be living with a degree of social distancing for some time to come. Although challenging, this will provide businesses across the automotive sector additional time to develop and refine new ways of working, including no-contact delivery, inspection and collection of vehicles.

 

Strategically

Better asset utilisation and increased fleet flexibility

Whatever the future holds, the restrictions enforced over the last few weeks have highlighted the need for flexible transport solutions designed to fit new ways of living and working. A key component of this will be ensuring that businesses and individual drivers get the most value out of the vehicles they operate.

Understanding more about how to fully optimise the size and shape of your fleet, makes it easier to manage vehicles and journeys in a way that not only controls costs and risk but also enables businesses to react swiftly as market conditions change.

At the end of the day, whilst the economic uncertainty and restrictions on movement resulting from COVID-19 are far from easy to deal with, they can also be the mother of invention and that, if nothing else, is a little bit of good news amongst the chaos.