EU automotive industry faces ‘unprecedented crisis’ from coronavirus

23 March 2020

23 March 2020

The European Automobile Manufacturers Association (ACEA) has described the coronavirus (COVID-19) as having an unprecedented effect on the global economy and ‘grave consequences’ for the automotive sector.

Most of ACEA’s members have announced temporary plant closures because of COVID-19 infections and quarantines among employees in an environment of collapsing demand, supply shortages and government measures.

‘It is clear that this is the worst crisis ever to impact the automotive industry,’ stated Eric-Mark Huitema, ACEA director general. ‘With all manufacturing coming to a standstill and the retail network effectively closed, the jobs of some 14 million Europeans are now at stake.’

Two things

He went on to say that ACEA is calling for strong and coordinated actions at national and European levels. His hope is that this will provide liquidity support for manufacturers, as well as their suppliers and dealers. Huitema acknowledged the policy measures, which have already been put in place to support businesses and their employees, but called for a dialogue with the president of the European Commission to do two things.

‘Firstly, to take concrete measures to avoid irreversible and fundamental damage to the sector with a permanent loss of jobs, capacity, innovation and research capability. Secondly, Europe should prepare to stimulate the recovery of our sector, which will be a key contributor to the accelerated recovery of the European economy at large,’ he said.

Whilst the situation continues to unfold, it is important to keep the production and supply of spare parts going as well as vehicle-service networks. This will be essential for the maintenance of vital logistics as well as supporting the work of the emergency services.

‘The free flow of medicines, food, fuels, equipment and supply parts across the EU must be guaranteed under all circumstances.’ Huitema stated.

13.8 million Europeans

Vehicle manufacturers operate some 229 vehicle assembly and production plants across the EU, directly employing 2.6 million people. More broadly, the sector provides direct and indirect jobs for 13.8 million Europeans. ‘The health of those people that are the backbone of our industry, and their families, is paramount to Europe’s automobile manufacturers,’ said Huitema.

On a financial level, the industry is a key contributor to the European economy. With the sector generating a trade surplus of €84.4 billion for the EU, and motor vehicles accounting for €428 billion in taxes in the EU15 countries alone, the need to support the sector is vital.

Andreas Geilenbrügge, head of valuations and insights at Schwacke, recently wrote that scars left by previous crises are hardly comparable with the current situation. Systems once considered strengths like ‘just-in-time’ supply chains are now revealing themselves to be particularly vulnerable to the ongoing disruption.

‘The duration of the measures and how long it takes to get back to a normalised social life will be decisive for further development,’ Geilenbrügge added.