Darwin Rules

Justin Cox, Director, Global Production

04 December 2020

Darwin Rules:  Pandemic accelerates change

At the start of 2020, the auto industry already appeared to have quite enough to deal with.

Impacts from tightening emissions, technological change, increasingly sophisticated consumers, and the growing importance of new players were already threatening both the market structure and the traditional way in which the industry has operated for decades.

Then, in early spring, a global pandemic was thrown into the mix. This has had the effect of highlighting inefficiencies – as well as opportunities – and arguably accelerating the pace of the industry’s structural change.

So far, increased financial burdens have intensified the rationalisation of model ranges, powertrain line-ups and even entire brands. In Europe, for example, cost pressures, combined with regulations, are now set to diminish local production of A-segment cars by almost half in the next five years as seven models are either deleted or offshored. Even ‘buoyant’ China does not escape unscathed, with the recent demise of several local brands, including some new EV start-ups, proving that the global car-making environment has become increasingly tough.

“VW’s historic Wolfsburg facility has recently benefited from new ICE-based models, but workers remain nervous that their plant has not been currently selected to assemble pure BEVs.”

This pandemic-fuelled industrial ‘stress test’ is also generating a new industrial map, with the locations of key new investments hinting at the emerging geography of auto assembly and its transitioning supply base. At a regional level, some facilities fear that they are being left behind: for example, VW’s historic Wolfsburg facility has recently benefited from new ICE-based models, but workers remain nervous that their plant has not been currently selected to assemble pure BEVs. At such a point of important change in the industry, plants, OEMs, suppliers and, indeed, countries all jostle to promote and claim their stake in the industry’s future.

As we approach the close of 2020 with brighter news of emerging COVID-19 vaccines, this year’s pandemic-based squeeze on an already disrupted auto industry is likely to have an enduring impact, which will accelerate the changing auto market and its operational landscape: only the fittest and most adaptable will thrive.