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Over the last few weeks governments around the world have been
increasingly pursuing a suppression strategy over the COVID-19
outbreak, which focuses on increasing social distancing with a
variety of measures in order to reverse the pandemic's growth and
thus managing healthcare systems' resiliency. These measures have
often resulted in stricter "lockdowns" that have had a severe
impact on manufacturing operations in non-essential sectors,
automotive being one of them. The deployment timeline of the
governments' measures has been staggered with different degrees of
stringency due to different level of exposure to the pandemic's
infection as well as different sensitivities around contagion
management.
Whilst the focus of several stakeholders of the automotive
industry is on the return of vehicle demand, we expect that once
vehicle sales resume in major markets OEMs and suppliers will be
presented with a different path in their "return to normal" based
on their manufacturing footprint, thus presenting potential
competitive advantages or disadvantages for specific OEMs and
suppliers as a function of their exposures to countries with more
relaxed or stringent measures. We also expect to see fairly
substantial time lags in the loosening of measures, in the same way
we saw some countries quickly ramping up restrictions while others
have lagged. In the context of an extended period in which
governments attempt to "flatten the curve" we might face continued
asymmetry in terms of supply/demand of parts and vehicles as some
countries return to normality while other are still grappling with
lockdowns. An example of this asymmetry has recently materialized
when several Chinese OEMs and suppliers voiced concerns about their
supply lines of auto parts being compromised by the measures
enforced by governments around Europe. This is a reversal of
fortunes compared to only a few weeks ago when European and US
carmakers were dealing with supply chain disruption linked to the
lockdowns in China's Hubei province between end of January and
February.
