Automotive > Infotainment & Telematics Blog

COVID-19: How's Your Business?

by Roger Lanctot | May 06, 2020

The COVID-19 pandemic has been a gut-wrenching experience for millions of people around the world - and heart-wrenching as well - and it's not over. Yet even in the thick of it life and work go on for many, while others have no work at all.

From the chart above you can get a good sense of what has happened to the global automotive industry - care of LMC Automotive. What the chart does not tell you is that rental cars are backed up and stacked up in overflow lots, that ports are jammed with cars making it impossible to unload cars from incoming ships, and auto factories in many parts of the world are idle even as auto dealerships are starting to re-open.

It looks bad in the auto industry, but the woe that is washing over the makers and sellers of cars pales by comparison to industries that have suffered true lockdowns - most notably travel and tourism including airports, airlines, hospitality companies, cruise lines, and any and all form of tourism operators, operations, and destinations.

A wide range of restaurants, retailers, and shopping malls are shut which has contributed to the evaporation of advertising which has taken a chunk out of the media industry - print and broadcast - with radio and print taking the harshest hits. Sports, theater, and other entertainment venues - done, for now.

All of these organizations are plotting a course to recovery. Some may never recover.

At Strategy Analytics our clients are plotting their return to business as usual - even though we know business will never be the same again. But the big question plaguing planners is whether to hit the brakes or the accelerator to emerge from the crisis.

Car enthusiasts know that you turn in the direction of a skid. You accelerate into the turn. But how do you do that in a pandemic? And how does that advice apply to MY industry? To my LIFE?

As I write these words, automotive engineers and their managers are making the decisions that will determine how their organizations fare in a post-COVID-19 environment. The choices that are made during these vital, seemingly idle, weeks will determine who finishes the race closest to the checkered flag.

For some, it is clear, certain projects have been shelved, delayed or deferred. In the automotive industry we have heard of multiple vehicle launches (or SOPs - starts of production) - many originally planned as high-profile events - that have been put off.

We have also heard of great strategic decisions regarding electric or autonomous vehicle programs that have been cancelled or set aside. We have seen car sharing programs shuttered.

But cars must be made and sold and technology marches on. Today, car makers are making the key decisions to either accelerate or decelerate innovation efforts. Will 5G arrive on time or be put off for a year? Will Ethernet architectures in cars be boosted into more vehicles with higher bandwidth - or will the march to multi-gig vehicle networks be sidelined.

Car makers are dividing along these decisive lines - to rush forward or to hold back. To be bold in the face of uncertainty or to marshall resources. At Strategy Analytics we advise and we expect that the market at large will accelerate innovation in the face of COVID-19 recovery. That advice and that expectation is behind Strategy Analytics' forecast for a relatively swift recovery from the grim downturn in which we find ourselves.

The Global Automotive Practice at Strategy Analytics released its Q2 2020 Infotainment and Telematics update which includes commentary on the market implications of the COVID-19 crisis. On the back of a weak 2019, in 2020 we expect the market for suppliers to fall by 14%, before a strong rebound in 2021 (+12%).

“We expect some parts of the supply-chain to experience a slower return, due to over-supply in Q1 2020” said Richard Robinson – Director of the Automotive Infotainment & Telematics Service. “However we should not forget that suppliers were tooling up and shipping products well into Q1 based on pre-COVID-19 2020 vehicle production forecasts of 90 Million units.”

South Korea and China in particular have a head start in sorting out the supply-side of the equation, however the demand-side is much less certain. The reality is 2020 production of closer to 77 Million units. This new reality has required suppliers to put their feet firmly on the brakes as OEMs and their suppliers wind down inventory and navigate a path back to growth, which will clearly include aggressive incentives and government support in the form of cash-for-clunkers programs.

To survive the skid and to make it through the turn is now going to require some gas. We expect to see car makers pour on the innovation in the coming months and leapfrog some of their development plans. For everyone else to survive as well it's time to take the wheel, hit the gas, up your game, and find a way to jumpstart your personal market position. Go time is coming soon. We need to be ready.

The full implications of the Infotainment & Telematics market changes including detailed commentary as well as system and chipset forecast updates are available for download or access online using MetrixLive

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