The coronavirus could change truckmaking forever
Truck- and carmakers already knew that 2020 would be a critical year for them. But they assumed it would be because of the regulatory push to bring vehicle emissions down through programmes like the European Green Deal. That was before the coronavirus hit. The pandemic has upended life in so many ways, yet when it comes to the transport and automotive sector, some trends have speeded up.
From combustion to electric
The gradual shift from combustion engines to electric vehicles now looks like it will accelerate. The automotive sector in Europe was already investing heavily in new technologies. The fractured manufacturing sector has long been ripe for overhaul, with companies poised to consolidate and merge as they develop joint EV platforms.
Covid-19 has been such a heavy body blow that these transitions will come faster – not least because governments are demanding more low or no-emission vehicles as guarantees for their generous bailouts.
It is worth looking at why the pandemic has hurt the industry so much. Firstly, factories shut down or at least operated partially as lockdowns were imposed. The disruption of supply chains did not help either. And even when factories reopened, it was hard to impose social distancing on the assembly lines.
An uncertain future
Second, there is the massive economic hit to consumers and b2b markets: when jobs are being shed across the board, people are less inclined to splash out on new car models and businesses are reluctant to making new investments. Car sales for example, are expected to plummet by a fifth, to a level last seen in the depths of the global financial crisis of 2007-09.
And then there is the uncertainty about the future. The initial lockdowns restricted car use to essential journeys, prompting many people to explore alternatives. Cycling and walking became popular. Work from home became more viable. Many cities announced car-free zones.
All this has raised almost existential questions about the future of cars. And in Europe, France and Germany – the two biggest carmaking countries – waded in to help their champions.
France’s response is an €8 billion rescue plan for its automobile sector, but with crucial green strings. The package includes customer grants of €7,000 off electric vehicles and €2,000 for a hybrid. Paris also gave a €5 billion bailout for Renault, which then announced it would cut 15,000 jobs worldwide as part of its €2 billion cost-cutting scheme.
Germany, meanwhile, announced €2.2 billion would be spent on incentivising EVs, supporting auto industry jobs and helping the sector to decarbonise – including €6,000 consumer grants for EVs. Other measures included €7 billion in hydrogen investments, and €2.5 billion for EV recharging infrastructure and battery manufacturing.
Not all doom and gloom
European carmakers are still trying to persuade the EU to put the brakes on its emissions-cutting timetable, saying the virus has disrupted their target. The industry also wants governments to launch large scale scrappage schemes to boost demand for new cars and help out the flagging industry. But so far Europe is sticking to its Green Deal plans.
The future is not all doom and gloom for the automotive sector. Driving has emerged as the socially distant transportation mode of choice as wary commuters try to avoid trains, buses or ride-hailing. This could help spark a comeback for cars. While sales have collapsed in Europe, carmakers have noted that they have rebounded in China in recent months, to levels that surpass 2019.
But there is a long way to go. The car industry was already facing a monumentally expensive shift to electric cars. It could yet emerge from the pandemic leaner and greener.