Impact of covid 19 on automobile industry
Abstract
While employment in the automotive industry had recovered from the 2008-09 global financial crisis, employers and workers across the global supply chains of the industry are once again faced with great uncertainty. Since the global pandemic began in China, the impact of #COVID-19 on the automotive industry was first felt in Asia, but has since become severe throughout the world. The study is the find out the impact of COVID19 on automobile industry.
Chapter one
Introduction
Background of the study
The COVID-19 pandemic has had a swift and severe impact on the globally integrated automotive industry. Symptoms include a disruption in Chinese parts exports, large scale manufacturing interruptions across Europe, and the closure of assembly plants in the United States. This is placing intense pressure on an industry already coping with a downshift in global demand, and likely leading to increased merger & acquisition activity( https://www2.deloitte.com).
The automotive industry makes a significant contribution to the global economy. The industry’s annual turnover is equivalent to the world’s sixth largest economy. In 2017, global direct employment in the industry was estimated at nearly 14 million workers. While employment had recovered from the 2008-09 global financial crisis, employers and workers across the global supply chains of the industry are once again faced with great uncertainty. Since the global pandemic began in China, the impact of COVID-19 on the automotive industry was first felt in Asia, but has since become severe in all other parts of the world (https://www.ilo.org/)
The automotive industry is facing a sharp drop in demand and investment. It is also struggling with an abrupt and widespread stoppage of economic activity, as workers are told to stay at home, supply chains grind to a halt and factories close. Restrictions on the movement of people and the sudden stoppage of economic activity are expected to cause a severe contraction in sectoral output and Gross Domestic Product (GDP). It is estimated that factory closures in Europe and North America have caused some 2.5 million passenger vehicles to be removed from production schedules, at a cost of US$77.7 billion in lost revenue for automotive and parts manufacturing companies.
This is having negative multiplier effects on the economy through backward and forward linkages, particularly in countries such as Canada, China, Germany, India, Japan, Republic of Korea, Mexico, Morocco, South Africa and United States, where the automotive industry is a major driver of economic growth. Small and medium-sized enterprises (SMEs), which account for the bulk of employment in the sector and provide intermediate inputs and services to multinational carmakers, are expected to be severely affected (backward linkages). Sectors likely to be affected by the closedown in the automotive industry through forward linkages include: transportation (e.g. freight, ground passenger transport, charter buses) and services (e.g. passenger car rental and car repair). (https://www.ilo.org). The pandemic has resulted in an unprecedented surge in unemployment in the automotive industry across its supply chains. Many more jobs will be at risk if governments, employers and workers do not take immediate action to ensure the survival of SMEs and protection of workers. Based on this background the researcher wants to investigate the impact of COVID19 on automobile industry.
Statement of the problem
Coronavirus (COVID-19) Pandemic emerged around the end of December 2019 at Wuhan, Hubei province, China. The pandemic is having a major impact on all aspects of industries, including automotive sector, with major manufacturers either totally shut down following the directives issued by local governments or are running with minimal staff at production units to keep their personnel safe. For already struggling automotive industry, the global economic trade impact of COVID-19 pandemic on automotive industry is estimated to be around $ 5.7 billion with European Union the worst-hit region at $2.5 billion decline in automotive industry due to disruption in automotive supply chain amid reduction in supplies from China. Major automotive events across the globe are either being cancelled or postponed, notably 2020 Geneva motor show, Qatar Grand Prix, New York International Auto Show, and Australian Grand Prix. Major automotive players such as Fiat Chrysler Automobiles, Ford, PSA Group, Volkswagen Group factories in Europe, Ducati, Tesla factory in California, BMW group European factories, Rolls-Royce, General Motors are among the global automotive manufacturers who have suspended their production due to Coronavirus (COVID-19) pandemic.
Objective of the study
The objectives of the study are;
- To ascertain the effect of COVID19 on production in Automobile industry
- To ascertain the effect of COVID19 on trade in automobile industry
- To ascertain the level of demand in automobile industry in the period of COVID19
Research hypotheses
For the successful completion of the study, the following research hypotheses were formulated by the researcher;
H0: there is no effect of COVID19 on production in Automobile industry
H1: there is effect of COVID19 on production in Automobile industry
H02: there is no effect of COVID19 on trade in automobile industry.
H2: there is effect of COVID19 on trade in automobile industry
Significance of the study
The study will give a clear insight on the impact of covid19 on automobile industry. The study will be very significant to students and the automobile industry. The study will look at the effect of covid19 on automobile industry in terms of production, demand, trade etc. the study will also serve as a reference to other researchers that will embark on the related topic
Scope and limitation of the study
The scope of the study covers impact of covid19 on automobile industry. The researcher encounters some constrain which limited the scope of the study;
- a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
- b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
1.7 DEFINITION OF TERMS
COVID19: Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus.
Automobile industry: The automotive industry comprises a wide range of companies and organizations involved in the design, development, manufacturing, marketing, and selling of motor vehicles. It is one of the world’s largest economic sectors by revenue.
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