Assessing the Financial Impact of Corona Virus on the UK Automotive Industry

This report assesses the financial impact of corona virus on the automotive industry in the UK, including the issues faced and possible solutions.

Assessing the Financial
Impact of Corona Virus
on the UK Automotive
Industry

Contents
INTRODUCTION.....................................................................................................................................3
Identification of a specific researchable topic area..................................................................................3
Importance of the problem.......................................................................................................................3
Research Aim..........................................................................................................................................4
Research Objectives................................................................................................................................4
Research Questions.................................................................................................................................4
Literature Review......................................................................................................................................4
To analyze the financial impact of corona virus on automotive industry in UK......................................4
To recognize the issues faced by automotive industry due to COVID 19 pandemic................................6
To determine possible solution to overcome from challenges faced by automotive industries................8
CONCLUSION........................................................................................................................................10
REFERENCES........................................................................................................................................11

INTRODUCTION
The automotive industry is one of the most important sectors for the country as it
contributes to its overall economic development. But the recent outbreak of the corona virus has
impacted the automotive industry of the country in an adverse manner. This is because all
organizations across various industries had to close their factories and dealerships from the mid
of March with only some of them reopening in the month of May (Abodunrin, Oloye and
Adesola, 2020). The automotive industry is one of the industries that have been affected the most
as a result of the pandemic. There was a significant decrease in the production of vehicles in the
month of March. And in order to get the process of vehicle product to normal would require a
considerable amount of time. All the organizations operating within the industry will have to
follow all the safety measures when they resume their business processes. The automotive
industry of the United Kingdom has hit the lowest level since the financial crisis after the one in
the year 1984. The report is based on assessing the financial impact of corona virus on the
automotive industry of United Kingdom. It also identifies issues faced by the industry as a result
of the pandemic as well as a solution to overcome these challenges.
Identification of a specific researchable topic area
The primary reason behind selecting this particular topic is that the outbreak of the
corona virus has not only impacted the retail industry and hospitality industry, but also the
automotive industry in a negative way. Also, not many researches or studies have been
conducted to analyze the financial impact that the corona virus has had on the automotive
industry. Also, since the impact of corona virus on different industries is one of the most
discussed topics today, it is important to research about this topic. Therefore, the research will
help in building an understanding of the same in an effective manner.
Importance of the problem
The outbreak of corona virus has resulted into a considerable amount of decline in the
number of vehicle production within the automotive industry. The research will help in
identifying the impact of corona virus on the automotive industry and solution for the same
(Anari and et. al., 2020). There is a need to research about the problem in order to obtain relevant
data as well as information about the same. This will further help in making informed decisions

and implementing the right strategies so that they can be implemented if a similar situation arises
in the future.
Research Aim
“To assess the financial impact of corona virus on the UK automotive industry.”
Research Objectives
 To analyze the financial impact of corona virus on automotive industry in UK.
 To recognize issues faced by automotive industry due to
COVID 19 pandemic.
 To determine possible solution to overcome from challenges
faced by automotive industries.
Research Questions
 What is the financial impact of corona virus on automotive industry in UK?
 What are the issues faced by automotive industry due to
COVID 19 pandemic?
 What is the possible solution to overcome from challenges
faced by automotive industries?
Literature Review
To analyze the financial impact of corona virus on automotive industry in UK
The United Kingdom is considered to have one of the most productive automobile
industries in the European Union. The outbreak of corona virus has caused a widespread concern
not only for the consumers, but the manufacturer within the automotive industry as well. This
has also resulted into an impact on the overall supply chain of organizations that operate within
the automotive industry. The production of vehicles has shut down due to which the overall
financial condition has also been impacted (Barabari and Moharamzadeh, 2020). The pandemic
has posed a lot of financial challenges for the industry and it is being anticipated that it would
require a considerable amount of time for the companies to get back to their normal functioning.
March is among the busiest months for companies in a year. The automotive industry within the
United Kingdom has been one of the most affected industries with the number of new car
registrations falling by 44% (How coronavirus is impacting sales & marketing in the automotive

industry, 2020). This is said to a much steeper decline as compared to the one during the
recession of 2008.
Due to the lockdown and the social distancing, the customers were not able to visit the
car showrooms. This has resulted the customers in not being willing to spend a lot on buying a
car. This is because there is a financial instability within the market. As the consumer demand
for cars is gradually diminishing, it has been observed that a lot of brands have suspended or put
a hold on their production process (Khan, Ali and Aftab, 2020). Major companies to do so
included Jaguar Land Rover, Nissan, Honda etc. A recent study that was conducted, showed that
automobile companies within the United Kingdom were either concerned or very concerned
regarding the impact on operations of their suppliers as well as their respective business on the
whole. Besides these, another major area of concern for the companies is the low demand among
customers and the availability of the raw materials. Although, the companies have now resumed
their business operations, they have still warned the customers regarding delays on cars that are
pre-ordered, especially the ones that depend on suppliers that provide raw materials from
overseas. In some cases, it is still possible to buy a car from manufacturers who have existing
stock by placing an order through the company’s online website.
It can be said that corona virus has impacted the operations of the automotive industry in
a negative manner. But, in order to resume their services to normal and attract customers, there
are some car dealers that are offering services remotely (Muzakki, 2020). They are offering
services like home test drives, virtual tours, contactless buying etc. All these measures are being
taken in order to ensure safety as well as security of both, the employees of the company as well
as the customers. Taking into account the financial instability within the country, automobile
companies like Ford are have introduced a campaign named “Peace of Mind”, wherein the
customers can buy the car and make payments up to a time limit of 6 months. This initiative is
basically to attract a greater number of customers and improve overall sales. Although the
companies have put a hold on or stopped their production process, they are still advertising about
the products and services in order to keep the customers engaged with the brand. Organizations
within the industry have panned the process and instead of investing huge amounts of money in
advertising during the time of financial crisis, they are promoting themselves and their products
through various social media platforms like Facebook, Instagram and Twitter.

The automotive industry within the United Kingdom has reported about a 13% increase
in its overall advertising through various mediums (Norouzi and et. al., 2020). Companies like
Ford are developing and producing ads that are mor inclined towards their response to the corona
virus. The corona virus has also changed the buying behavior of the customers during buying a
car. The United Kingdom has also reported n overall decline in the overall sales by 36% as
compared to the same period during last year. Analysts within the United Kingdom have
estimated the overall income of the country to fall approximately by 26% (Weekly Update:
COVID-19 Impact On Global Automotive Industry, 2020). Although the rate of sale for both
used as well as new cars is constantly declining, the rate for new cars was recorded to be even
steeper, which is not a good sign for the automotive industry. Due to financial instability many
automobile companies have let go of their existing employees in order to save money. Therefore,
it can be said that the out break of corona virus has resulted in a very difficult time for different
industries, especially the automotive industry with the United Kingdom.
The pandemic has also made it difficult for the industry to deal with the declining
demands for vehicles along with struggling to meet the new targets. The figures that depict a
decline in the sales are considered to be the lowest since the year 1946. But since the lockdown
was introduced, the numbers are not completely unexpected. It would take a considerable
amount of time to return back to the original sales numbers. The financial impact of the corona
virus has also put a lot of jobs within the UK automotive industry at risk because there are no
customers to buy the cars that are manufactured by the companies operating within the industry.
Suspending the business operations since the month of March has resulted in a lot of loss for not
only the companies that were operating at a lower level, but also the ones that had a hold within
the market (Sokol and Pataccini, 2020). And it can be certainly said that the industry would
require a lot of efforts to return to previous position of being among the most productive
industries within the United Kingdom.
To recognize the issues faced by automotive industry due to COVID 19 pandemic
As per the article of PWC (2020), it has been determined that there are various issues and
problems that is faced by company dealing in automotive industry due to COVID 19 pandemic.
It is essential for organisation to determine and analyse the different factors or elements which
are issue for company as well as lead to have negative impact on automotive industry. COVID

19 leads to have major negative impact on business practices as well as affect the purchasing
capabilities of customers to buy product (COVID-19 and the automotive industry, 2020). This
have impact on various sectors all around the world as well as impact over economic growth and
development. Due to COVID 19 capabilities and potential of company in automotive industry is
affected and organisation is not able to successfully and effectively perform business practices.
There are various large and multinational companies dealing in automotive industry and their
functioning has been affected by pandemic of COVID 19. Different issues and challenges that is
faced by automotive industry is mention below in detail –
 Lack of financial resources – There is lack of financial resources available to business for
conducting different activities for automotive sector. Organisation in respective industry
have to purchase different types of raw material and other resources for successfully
developing high quality products. Due to lack of resources company is not able to
purchase required set of raw material for creating products as well as conducting
manufacturing practices. Lack of availability of resources is one of the major issues
which is affecting the functioning of organisation as well as carry out business practices.
Due to issues of financial resources automotive companies are not able to perform
business task and activities in required manner (Lea, 2020). This is directly affecting
growth and profitability of business.
 Potential global recession – Due to COVID 19 there is global recession and this is issues
which is affecting organisation in automotive industry. Due to global recession
unemployment rates increasing as it will lead to have direct impact over the potential of
customers to purchase products. Global recession has reduces the job opportunities and
growth of business. Automotive sector is majorly affected by global recession as well as
increase in unemployment rate as it will directly or indirectly affect the functioning of
company is effective manner. Due to this economic capacities and potential of
automobile companies is also affected.
 Decrease in demand – Another issue that is faced by automotive industry due to COVID
19 is less demand of automotive products in market area. This sector includes luxury
products and during the time of COVID 19 most of the people are focusing on meeting
with the necessary needs and want for their survival. COVID 19 have affected the market
area of automotive sector and it has direct impact in sales and profitability of companies

in this industry. Decrease in demand of automotive products and less sales in major
issues for that is faced by business in automotive sector. Due to this sales and
productivity of companies in decreasing and it lead to heavy loses to companies.
 Reduction in productivity – Automotive industry is facing major issues of productivity.
Due to COVID 19 pandemic manufacturing and production process of automotive sector
has been stop for certain time period (Barua, 2020). Because of lockdown or direction of
government production practices or manufacturing activities was not conducted and it
lead to major negative impact on business overall productivity as well as raw material of
automotive sector. Increase in this issues have influence over employees and reduction of
staff member. Due to COVID 19 automotive industry has less number of worker for
conducting business process as well as manufacturing of products. This lead to directly
impact over the production process of automotive company and this sector have to face
issues of less or lower productivity.
 Difficulties with funding – Automotive industry is facing issue in colleting funds and
investment for conducting business task. COVID 19 issues has affecting capabilities of
automotive industry for assembling funds in order to successfully conduct business task.
Due to difficulties with funding automotive industry has less financial resources to
perform business activities and attain desired goals. There are less sources in market for
gathering funds and investment so that function of organisation can be smoothly
conducted. This is the issue that is affecting automotive business and performance in
market area.
 Operation and supply chain issues – Due to COVID 19 automotive sector is not able to
carry out business operation as well as manage supply chain of company. this is affecting
the capability of automotive company to provide manufactured products to potential
customers. It is very difficult for automotive sector to supply developed products to
customers because of strict guideline of government. Due to this business of automotive
sector is failing to successfully operate organisational practices as well as effectively
management supply chain activities of business.
To determine possible solution to overcome from challenges faced by automotive industries
According to Accenture (2020), it has been determined that company needs to determine
and analyse the most effective solution in order to overcome the challenges that is faced by

automotive industries. It is important for company to analyse and evaluate different factors and
elements that will lead to impact over business. Analysis of major issues will help company to
successfully resolve the issues as well as managing business practices in more effective and
efficient manner. COVID 19 pandemic is major issues and it will lead to have various negative
impact on business as well as its activities. It is very difficult for automotive sector to correctly
conduct activities in previous manner as this issues changes business environment. It is essential
for company to evaluate the solutions to the different challenges faced by company as well as
conduct business activities in required manner (COVID-19: Mobilizing the automotive industry
now, 2020). There are different solution which will assist company of automotive industry to
overcome the problems and challenges as well as increase performance and productivity in
market area.
 Digital media marketing – This is very effective and useful way of marketing which can
be consider by automotive industry for providing information about the products to
customers. There are different social media networks that have large number of users.
This will be effective marketing strategy that will help company in successfully
conducting business practices as well as carry out task in required way. Automotive
companies will be able to conduct marketing activities as well as promote its products in
more creative and innovative manner. This will be less costly to company as well as able
to reach large market area. Digital media marketing in more safe and secure at the time of
COVID 19 pandemic for company as well as customers.
 Innovative technology – It is essential for automotive company to consider new and
innovative technology while performing business activities. innovative technology will
be significant for effective and efficient functioning of business as well as timely
completion of task. There are different new and innovative technologies which will be
beneficial at the time of COVID 19 issues. Information system will help in keeping track
over business process and supply gain system. This will reduce direct human
involvement and keep safe form the issue of corona.
 Close contact with suppliers – It is crucial that company is directly contact with
suppliers and reduce third party involvement. This solution is significant for saving the
cost of third party as well as direct communication with suppliers will help in fast
delivery of products or raw material (Ayittey and et.al., 2020). Close contact with

suppliers is effective solution for automotive company that is not able to carry out
business practices due to lack of resources. This solution is useful for overcoming
different issues and problems of automotive company which is affecting the smooth
performance of business process. Timely delivery of raw material will assist in enhancing
performance of company as well as improving business practices in effective manner.
 Develop strong relationship with customers – Customers are very important part of
business and strong relationship with customers will be very helpful for success of
automotive sector. There are many companies in this sector face issue of lower sales and
profits along with the decrease in demand of products. By developing effective
relationship with customers company will be able to identify and determine the need of
customers and this will help in improving sales. Strong relationship and effective
communication with customer is significant for determining requirements of customers as
well as enhancing sales and profitability.
CONCLUSION
From the above report it has been concluded that there are different issues and problems
faced by automotive sector due to COVID 19 pandamic. These issues will lead to have affect
over functioning of business as well as sales of products. Organisation is facing challenges of
lower sales and profitability. Apart from this there are different solution that is signiciant for
resolve the problems of automotive sector.

REFERENCES
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Barabari, P. and Moharamzadeh, K., 2020. Novel Coronavirus (COVID-19) and Dentistry–A
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Online
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