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