The automotive industry is known to heavily rely on the impacts of interest rates and the corresponding economic volatility. The purchase of automobiles, like houses, are very sensitive to the cost of capital and they are typically financed when they are acquired. Automotive sales are a beacon of consumer sentiment, consumer spending and the strength of the economy.

Automotive sales for the first two months of 2020 started off ahead of 2019, with little warning of what was to come with COVID-19. Luckily, the Original Equipment Manufacturers (OEM), who influence a big part of Canada's manufacturing base, remembered the lesson they learned during the 2008 financial crisis. They seem to have the "rainy day" covered - for now, which is important, as some of their liquidity will make it to the manufacturing supply base and will soften the impact.

Looking ahead

As we adapt to the New Reality, the pandemic will have long-term implications on the automotive sector and the industrial markets industry overall:

  • Industrial markets will need to re-examine the concentration of the manufacturing supply chain in foreign markets, particularly for critical products like pharmaceuticals. The COVID-19 pandemic has highlighted the need to be able to respond to an emergency and procure necessary products quickly. OEMs will play a lead role as they re-examine the economics and safety of their sourcing strategies.
  • Pathogens and their contagious nature are fatal in some instances and expensive if they are not contained. There will be an intense spotlight on prevention and treatment of infectious diseases, and Governments around the world will have to focus capital and resources to prevent the recurrence of such an event.
  • Personal and corporate borrowings will regain some of the respect they have lost over the last 10 years. Businesses will have to structure their balance sheets to be able to withstand an unanticipated interruption in activity and the Canadian consumer will have to get used to the fact that sometimes it rains, for 30 days or more.

Key insights

As automotive manufacturers continue to face a variety of challenges as a result of the pandemic, the articles below feature key insights to consider as our current environment evolves.

Virus chain reaction: Federal Government takes steps to aid manufacturing sector in Canada

An overview of the initial impact of the COVID-19 pandemic on the automotive industry, the role that manufacturing and transportation play within the economy, and the chain reaction on suppliers and sales that occurred as companies conserve cash.

All for one and one for all: Auto industry imparts need for a coordinated reopening of the economy

As the automotive industry prepared to reopen their production facilities, there was a lot of pressure for a coordinated reopening of the economy. If the automotive companies are able to succeed, this will set an example for how to restore manufacturing activity in a safe and effective manner and help set a standard for others industries to follow.

Why your grandmother was right: Saving for a rainy day is a good idea

With the automotive industry reopening some of its production facilities to help get Canada working again and restore the economy to the levels we enjoyed before the COVID-19 shut-down, it has become increasingly important to remember Grandma's advice to save money for a rainy day because it eventually rains, sometimes for 30 days or more.