Impact of Coronavirus on the Automotive Industry & Chip Shortage

Posted by Karim Ojjeh

While the automotive industry was looking for different exit points to reverse the continuous shrinking trend, it faced perhaps one of the biggest crises in its history due to the new type of coronavirus COVID-19, which was first seen in China in December 2019 and affected the whole world in a short time. While the pandemic showed its effect at different times in each country, the contraction rates also showed the same effect. The pandemic affected not only sales but also the flow of production due to disruptions in the supply chain. Health concerns in society caused giant companies to stop their machines with the support of non-governmental organizations and unions. Automotive factories in almost every country in the world had to stop their production.

Motor Shows

The pandemic has spread to almost all areas of automotive, not just production and sales/marketing. The Geneva Motor Show, the world's most famous auto show, scheduled to be held for the 90th time in March 2020, was not held at the last minute as the Swiss Federal Council canceled "events with more than 1,000 people". The pandemic spread so quickly that no one could have guessed it would be so destructive. It wasn't just Geneva that was canceled. Mobile World Congress, the technology fair in Barcelona in February, was also among those canceled. The reason why we included a technology fair within the automotive topic is due to the desire of automotive brands to take part in technology fairs effectively. While the New York Auto Show was postponed to a later date at the first stage, this postponement was canceled in May, saying "see you stronger in 2022" due to the conversion of the fairground to a temporary hospital.


According to the report published by Meticulous Market Research in May, the automotive industry lost $5.7 billion worldwide at the end of all these processes. Europe's automotive industry was the region that suffered the most, with a loss of $2.5 billion. According to the same research; In 2020, the automotive industry is expected to shrink by 15 to 20 percent compared to the previous year. In the European market, where 2.6 million people work directly, 1.1 million employees were economically affected by this pandemic. It is reported that the loss of production in Europe alone is over 1 million units.

Sharing & Rentals

Certain topics among the trends of the last 10 years in the automotive industry suffered losses during this pandemic period. The first of these was "Car Sharing Systems", which we can call the sharing economy. Simply put, car rental companies are on the verge of bankruptcy with the cessation of airline transportation. As of May, Hertz, one of the oldest and largest car rental companies in the world, applied for a concordat for its operations in the USA and Canada.


Due to the anxiety arising from the pandemic, daily or hourly car rental services came to a standstill. To revive this system, automotive companies announced that they will set new hygiene rules. 100 percent electric vehicle investments, which gained momentum with the declaration of diesel vehicles as "bad siblings" due to the emissions they spread to the environment, were interrupted during the pandemic process. New electric cars, the production of which was delayed due to disruptions in the raw material supply chain, caused a loss to companies every day they were not produced. Automotive companies, which still gave the green light to low-profit productions to show their environmentalism, had to postpone their plans.

PR Works

During the pandemic period, the automotive industry carried out the largest public relations work with R&D studies such as respiratory devices or mask production. Brands such as McLaren, Ferrari, Mercedes-Benz Formula 1 Team, and Ford have developed medical products in a short time and delivered them to regions where they are needed. It would bring great criticism if they did the opposite while their production had stopped; This should not be overlooked either. So much so that the breathing apparatus designed by Ferrari, inspired by F1 snorkels, will be a collector's item in the future.

What is Happening at the Moment?

While canceled fairs or world launches were replaced by online launches attended by limited people in studios, e-sports competitions began to take the place of familiar motorsports activities. Fairs, which have lost their popularity in the last 10 years, are perceived as the sector that has taken the biggest blow in this process. While office workers continued their lives from their homes, layoffs were tried to be reduced by methods such as short work schedules and the use of annual leaves. But hourly workers suddenly found themselves unemployed. Automotive services were tried to be continued uninterruptedly, but service entrances decreased by up to 95 percent. Governments announced support packages, donations were collected, it was tried to get out of this pandemic with minimum loss.

The Chip Crisis

Car production in the whole world fell sharply last month due to the impact of the chip crisis. Automobile production in July 2021 is the worst July performance for the industry since 1956.

Due to the lack of personnel, the global chip crisis, the coronavirus pandemic, and the problems in the supply chain, the production crisis in the automobile market continues all over the world. One of the places most affected by the crisis was England.

Production and Export Drop

According to the data announced by the Association of Motor Manufacturers and Traders (SMMT), one of the most important trade associations of England, automobile production in the country in July decreased by 37 percent compared to the same month of the previous year. Exports also decreased at the same rate. Production in the first 7 months of the year fell 29 percent behind the pre-pandemic period of 2019.


The automobile industry is one of the most important parts of the UK economy, with a turnover of £78.9 billion. This industry employs 180 thousand people in production and 864 thousand people in the supply chain. The crisis of the automotive industry in the UK may put the economy, which is in trouble due to Brexit and the pandemic, even more difficult.

What is the Chip Crisis?

Chips can be defined as electronic circuits placed on a metal plate designed with semiconductor materials. Chips are used in many electronic products, from computers to automobiles. New tools also contain multiple microchips, also called semiconductors.

The increase in demand for electronic products and disruptions in the supply chain due to the coronavirus pandemic that started in 2020 brought along a global shortage in the supply of chips used in the production of many technological products, from smartphones to computers, from military equipment to automobiles.

Analysts at Goldman Sachs predict that the chip crisis will plunge global automakers' operating profits by $20 billion in 2021. Due to the global chip problem, it is estimated that 7.1 million fewer cars will be produced worldwide this year than last year.

What Does the Future of the Automobile Look like?


The speed of the digitization process, which is more common in every aspect of our lives, will increase. The usual sales and marketing techniques will begin to be replaced by new ones. While more environmentally friendly and sustainable products will come to the fore, we will simplify our consumption habits. At least as long as we remember the pandemic, this process is expected to continue in this direction. Another thought is that an explosion is expected in the consumption habits that have been postponed with the loss of the effect of the pandemic. It seems that human beings' urge to consume cannot be restrained and their satisfaction will take place in a different direction.

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