The Big Picture

With confinement being progressively less restrictive across Europe and the US, automakers are trying to understand what the future will look like.

It’s been almost three months since the words Covid-19, coronavirus and global pandemic entered our everyday lexicon.

Like pretty much everything else, the automotive world ground to a halt. There was no option, it was a matter of public health and factories were shut down, showrooms closed, and sales, marketing and communication strategies simply torn apart.

Everyone knew the consequences would be dire and that uncertainty would be the only certainty when things got back to normal. Except normal is what we are not getting back so soon. Be it a vaccine or treatment, the solution to the problem is not around the corner and we all have to adapt to a new way of living in society for the foreseeable future.

As for the industry I love, well, to say it is in dire straits is a euphemism. Apart from those small output constructors, like Ferrari or Lamborghini, who operate in a different dimension, there will be a “before” and an “after Covid-19”.

I have been reading a lot and looking carefully at the press releases brands have been churning out and the picture is a sad one.

With Formula One not holding any races until at least the beginning of July, the first two casualties are here: McLaren and Williams. The Woking-based team, who is one of the biggest names in the sport, will have to let go of 1,200 workers from its competition and road car departments.

As for the outfit founded by Sir Frank Williams in 1966, recent news has brought a tear to my eye: it is for sale. To ensure the survival of the business and the employment of its workers, the Williams family is ready to relinquish control of a team that has won 16 world championships.

In the US and Canada, Hertz has filed for bankruptcy, seeking protection from creditors to have the time to reassert itself and emerge a healthier company. The rental car giant has been renting cars since 1918, when it opened shop with a dozen Ford Model Ts. A World War and the Great Depression could not bring it down, but then a virus came along in 2020.

In Italy, Fiat is seeking a €5.6 billion bailout programme from the government in order to resume operations and be able to develop new products and keep its workforce. On the other hand, in France, despite an €8 billion promise from President Emmanuel Macron, Renault is cutting 15,000 jobs.

The French leader says it will gladly help national automakers Renault and Peugeot with a never-before-seen amount of money, providing it is used to build electric vehicles within French borders. When politicians start imposing things on car makers, it tends not to go down so well.

Alpine, the recently revived brand that Renault is so proud of, was never going to be a big volume seller, but numbers seem to be a bit short of expectations and already there are rumours it will have to go full EV or go home.

In Germany, ZF, one of the world’s largest automotive suppliers and technology giants, is trimming its workforce by 10%, in the amount of 15,000 people, declaring that the financial independence of the company is at stake and drastic measures have to be enforced. They say predictions at this point indicate that, even in 2022, they will still fall short of their targets due to a “freeze in consumer demand”.

In Portugal, the new car market reached an all-time sales dip record with 84.8% fewer registrations than in the same period last year. Only 2,479 passenger cars were sold, whereas commercial vehicles accounted for just 948 plates. Looking at the UK, for example, things are even worse: the sales fall stood at 97.3% when compared to April 2019, while automotive production simply stopped: 99.7% less output than a year ago.

Major names in the business are also predicting a continuous impact on sales for the remainder of the year, even after all dealers are working as close to normal as possible and factories back to regular shifts.

It also seems clear the electric vehicle will get another big push from this situation, as governments and automakers take the chance to redefine mobility, especially in big cities, where public transport will undoubtedly suffer and private transportation will once again be seen as the only option for many.

As I write this, numbers for the month of May have not been made available yet, but I am sure they will only emphasize the conclusions already drawn by what we see so far.

The world will change again – probably in more ways than we can imagine right now – and the auto industry will necessarily have to change with it. But will they change for the better? Will we come out swinging on the other side of this? I hope so, but I wouldn’t bet on it.

By Guilherme Marques