Recap 2020: What it was for automotive industry

Recap 2020: What it was for automotive industry

The automotive industry faced a lot of hurdles in 2020 due to the pandemic. However, the industry showed resilience through its rise, fall, and resurgence. In all, how was the year 2020 for the Indian and ASEAN automotive industry? Autofintech’s recap 2020 takes a look.

Like several other industries, the year 2020 was less colourful and dampening for the automotive industry, in India and in the rest of the world as well. Obviously, because of the mess created by a virus named SARS-CoV-2 sized approximately 50–200 nanometers. The Coronavirus pandemic caused several things that were previously unimaginable.

The automotive industry had to shut down the production of vehicles, components, and instead, they started making masks, personal protective equipment, and ventilators. The automotive industry in India, in the year 2020, registered the ‘no sales April’, when not a single vehicle sold in India due to the lockdown. So far there were a lot of things the industry would like to forget. Also, despite the disruptions, these events accelerated a lot of changes as well – automation in manufacturing, digitalization in sales, etc.

In the year 2020, the Indian automotive industry witnessed the arrival of the most affordable and most expensive SUVs, in form of Nissan Magnite and Rolls-Royce Cullinan Black Badge, respectively.

PIC

So far, the year 2020 was a very eventful one for the automotive industry. Here’s a recap of the key events from the automotive industry in the year 2020.

Automotive industry Auto Expo 2020

A colourless Auto Expo

The Indian automotive industry began the year 2020 with a colourless Auto Expo in February. By then Covid-19 outbreak was spreading in several countries and started making headlines. Despite the car brands like Maruti Suzuki, Hyundai, Mahindra, Tata Motors, Kia, Renault, Mercedes-Benz, MG Motor, Great Wall Motor present at the event; there were a lot of major brands like Honda, Toyota, BMW, Audi, and FCA who skipped the event.

Interestingly, a major highlight of the Delhi Auto Expo 2020 was the Chinese carmakers. The car brands like MG Motor, GWM, and Haima grabbed a lot of eyeballs at the biennial event, showcasing an array of models. Also, this time, the Auto Expo witnessed a focus on personal hygiene maintaining moves like attendees wearing masks, gloves, face shields, using hand sanitizers etc, which were unusual before.

Globally, several auto shows were canceled due to the pandemic, including Geneva, Detroit, and Paris. Geneva Motor Show will not take place in 2021 either. Also, the pandemic has brought a massive change in terms of car launches. The automakers majorly have moved towards digital launches, instead of organizing physical launch events. This move is not only saving a huge amount of money for the brands but helping the attendees to remain safe during this crisis period.

From carmakers to Covid warriors

Soon after the Delhi Auto Expo 2020 ended, the Covid-19 bomb blasted in India and the outbreak started spreading rapidly, eventually leading the government to announce a nationwide harsh lockdown from late March. This resulted in halt of all manufacturing activities across the automotive industry. If March was registering the low sales, April recorded a complete ‘zero’ sales as the country stayed indoors.

However, the automotive industry found a way out to resume activity and contribute to society by not only donating generously in the fight against the pandemic but also starting production of masks, face shields, personal protective equipment, and ventilators. When the unlock phase began, the automotive industry resumed operation gradually and showing resilience now is back to near Pre-Covid times. Sales too have been recovering since the second half of the year, slowly but gradually.

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Phygital is the new trend

The covid-19 pandemic has caused a major disruption in the automobile dealership business pattern as well. The brick and mortar dealerships were facing a minuscule footfall due to the pandemic. This compelled them to change the strategy and opt for digitalization. Hence, the emergence of the new trend – Phygital that combines both the worlds physical and digital.

The new trend certainly has minimized a lot of operational costs for the auto dealers and helped them to adopt new technology as well as grabbing the attention of the customers, especially the new-age buyers. But, it also resulted in several job cuts from the dealerships. The auto companies and dealerships adopted the new normal like Work from Home strategy as well, where a certain number of employees, except manufacturing and workshop employees, are working from home, in a bid to avoid contamination of the virus.

Cleaner air with BS-VI

During the nation-wide Covid-19 lockdown, India entered a new and stringent BS-VI emission regime on 1st April 2020, after the deadline was set four years ago. The automotive industry including OEMs, component manufacturers, technology suppliers, oil producers – combined worked to meet the new norm. The BS-VI norm brought a significant reduction in tailpipe emissions for the vehicles, especially for diesel vehicles.

However, the new BS-VI emission norm has driven the vehicle prices higher, as the upgradation process has been a complex and expensive one. Due to the new emission regulation a number of small diesel engines called quit, including the Fiat 1.3-litre MultiJet engine, one of the most popular and widely used diesel motor in India by the brands like Tata Motors, Maruti Suzuki, FCA, etc.

As an aftereffect of the new emission norm, several automakers like Maruti Suzuki, Volkswagen, and Renault decided to quit the diesel segment. However, the other car brands like Hyundai, Tata Motors, Mahindra & Mahindra, and Kia decided to continue with the diesel portfolio. Meanwhile, Maruti Suzuki has decided to bring back its diesel cars in 2021.

In the meantime, with petrol cars gaining more attention than before, the small-turbo-petrol engines are witnessing a rise in the Indian market. Carmakers like Hyundai, Kia, Tata Motors, Volkswagen Mahindra & Mahindra, Nissan, and Skoda have already rolled out their small turbo-petrol engines. Renault and MG Motor too are about to join the party with their respective turbo-petrol engine-powered cars.

ASEAN Automotive Industry Sales Overview
Source: IHS Markit

How was 2020 for ASEAN automotive industry?

Like the rest of the world, ASEAN automotive industry too has faced a major setback in 2020. According to research firm IHS Markit, the ASEAN light vehicle sales are likely to decline by 29.5% to 2.38 million units in 2020, as compared to 2019. All the countries across this region have been negatively hit by the pandemic and forced into containment measures or lockdowns, halting economic activities, demand disruption, loss of income. Also, the ASEAN has faced a steep recession, high unemployment rate, reduction in income, and increased household debt.

According to Mayuree Chaiyuthanaporn, Senior Analyst, ASEAN Light Vehicle Sales Forecasts, IHS Markit, the automotive industry witness the highest pressure in sales across ASEAN in April-May 2020 due to the strict lockdown.  These two months marked a sales decline of 81% and 68% respectively, as compared to the same months a year ago.

However, the market recovered rapidly after some ease of lockdowns from pent-up demand during the lockdown, government stimulus packages, and an increase in consumer confidence.

The quick recovery in commercial vehicles like trucks and cargo vans has driven demand up during and post lockdowns from increasing small businesses due to unemployment in big cities resulted in people returning home in small towns. The rise in e-commerce and home-delivery services too aided in this recovery path. New launches and product updates especially in B/C SUV and small MPV also boosted demands from those consumers who were less impacted by the pandemic.

What’s ahead in 2021?

The Covid-19 pandemic is still far from under control. Despite the significant progress in the vaccines, the effect of the pandemic will certainly continue to linger for years. This will for sure alter the automotive industry in the coming days and 2021 would see many changes.

However, there will be more activities in 2021 in terms of new launches, product, and technology upgrades. The megatrends CASE (Connected, Autonomous, Shared, and Electric) would bring even bigger changes in 2021. In all, 2021 could start the ball rolling faster for a new mobility era.

Also Read: Cometh New Year, automobile manufacturers in India make cars expensive. Why?

(ASEAN data: Mayuree Chaiyuthanaporn and Oracha Sakunbunma, Senior Analyst, ASEAN Light Vehicle Sales Forecasts, IHS Markit.)

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