COVID-19 has disrupted our everyday lives and has impacted nearly every industry from toilet paper and hand sanitizer to airlines and restaurants. As one would expect, the automotive industry is no different. It’s tough to purchase cars when dealerships across the country aren’t operating as normal and people are searching for ways to complete contactless purchases. However, it isn’t just dealerships that took the hit from COVID-19. Foreign and domestic car manufacturers all across the globe were forced to enact temporary shutdowns last March in order to halt the spread of the coronavirus. As a result, many of these manufacturers suffered deficits and experienced lower quarter end profit margins because of the pandemic. However, it isn’t all bad news for automotive sales. As vaccines become readily available, lockdown restrictions are lifted, and stimulus packages are sent to support economic recovery, the automotive industry seems to be bouncing back. Let’s examine how COVID is affecting profit margins for both foreign and domestic auto sales.
The automotive industry in the U.S. was quite fragile for much of last year. Limited inventory due to plant closures, fewer incentives, and lower demand from consumers all contributed to declining sales last year. Domestic manufacturers such as Ford and General Motors suspended North American production for some time last year in an effort to combat the spread of COVID-19. As for the impact of the profit and and loss of these automakers, domestic manufacturers suffered a slump in profit margins and experienced a deficit of nearly 10% last year. Now, as vaccine efforts increase, restrictions are lifted, and economic recovery is beginning, domestic sales have slowly begun to increase in recent months. One reason for this is the push to online and digital sales. As social distancing continues to be encouraged, more and more consumers are shifting to online shopping and domestic manufacturers are taking notice. While brick and mortar dealerships are still experiencing declining sales, online sales are on the rise. As manufacturers continue to focus on contactless sales and better online experiences, we can expect to see a continued increase in domestic sales.
Across the board, both foreign and domestic automakers reported issues due to COVID-19. It should be noted that although manufacturers in China and South Korea did experience some decline, it was not as damaging as other countries because these countries were able to suppress the spread of the disease much faster. Other regions such as Western Europe and Southeast Asia experienced declines of more than 30%. Specifically, companies including Nissan and Mazda fell the most, while companies such as BMW, Hyundai/Kia, and Daimler experienced losses of only about 20%. Toyota also reported minimal damage and maintained operating profit margins at a low level. Fortunately, some foreign manufacturers, such as those in China, are seeing fats recovery thanks to improved car buying options and better incentives on new cars. The easing of lockdown restrictions in many European countries coupled with stimulus packages are beginning to benefit the region’s automotive industry.