With the total US economy expected to contract by 7% in 2020, the automobile industry has been one of the hardest hit. This is due to financially-struggling Americans placing big-ticket purchases on hold.
Much of the sales decline in premium and luxury cars can be attributed to the months of March and April, when dealerships and showrooms were unable to operate due to quarantine restrictions, in place in most of the country. However, even as dealerships reopened and vehicle assembly plants came back online in May, many small parts suppliers in regions like Mexico, were unable to comply with operational safety restrictions.
At a time when household names like BMW and Audi are witnessing their sales drop by a catastrophic 20-22%, electric vehicle newcomer Tesla is expected to log a USD6 billion increase in value sales, as well as high growth in stock market capitalisation. CEO Elon Musk has kept Tesla a permanent fixture in the news cycle, once threatening to shift production away from California in response to the state-wide restrictions forcing plants to stay closed earlier in the year.
Prior to the pandemic, the shift in consumer attitudes towards vehicle ownership was prompting strategic partnerships by the industry’s biggest players, such as BMW & Daimler’s FREE NOW mobility venture and VW & Ford’s agreement to share electric and self-driving vehicle technology. Automakers may now face as much as 30% overcapacity, and therefore, more consolidation in the form of mergers and acquisitions is expected for the forecast period.
The pressure exerted on consumer spending by the crisis has been disastrous for car sales. That being said, COVID-19 has made consumers wary of popular car-sharing, creating an aversion to high-density services like public transport; both of which could translate into growth in new car sales for financially-stable households.
The number of electric vehicle charging stations in the US is set to increase by 16% in 2020 to reach over 72,000. Further supporting the infrastructure expansion is California’s decision, made in September 2020, to phase out all sales of new gas-powered cars by 2035.
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