2. Geographic developments
Vehicle production declined steeply in North America and Europe due to shutdowns and the slow restart of operations in May. While retail demand is improving, production remains volatile due to supply chain disruptions. Vehicle sales are steadily recovering in China, and OEMs are operating at near pre-COVID-19 levels, but demand remains volatile due to the challenging economic environment. In Europe, logistics companies reported robust demand as they maintained essential services. E-commerce growth fueled demand in the US, while Asia-Pacific outbound average daily volume grew substantially, fueled by a PPE demand surge.
3. Financial initiatives
Automotive companies are utilizing prolonged credit facilities and increasing credit provisions for stronger financial flexibility to withstand and prepare for the pandemic’s second wave. Companies are also limiting their capital expenditures and retaining balance sheet flexibility for compelling transaction opportunities. Automotive retailers are using their cash to deleverage and are suspending share buybacks, delaying unessential capital expenditures and dividends. Airlines are raising additional liquidity through debt offerings, secured note transactions, stock issuances and the CARES Act Payroll Support Program.
4. Product and service innovation
Passenger and commercial vehicle companies are on track to meet the new emission norms, supported by the growing portfolio of electric vehicles (EVs). While a few peers delayed new launches, others used virtual modes to launch vehicles, with a heavy focus on electrified and connected vehicles. Automakers are adopting platform consolidation to reduce vehicle complexity for internal combustion engines and EVs. Electric engines will likely witness a higher reduction in complexity. Supplier peers are developing new products in more profitable and growing segments, with a focus on electrified vehicles, 5G connectivity and software.