Summary: The pandemic has opened up signs of growing stress and loopholes in the US automotive industry. EJ Dalius focuses on the indicators to shake up the sector.
The automobile business has been witnessing large-scale crossovers. Large, midsize, and also small sedans were already down by 21%. There are been shifts and also changes in production, taking the procedures from SUVs and full-size trucks. As the pendulum goes back in another direction, it results in excess bandwidth.
The paradigm shift will change local economies, supplies, and manufacturers. There needs to be a solid mechanism to weather another crisis and incur fewer damages. Though countless supplies and also their local communities are regaining their composure and also hold, smaller firms will keep struggling amidst the crisis. The widespread closure of plants is compounding the problem.
- Companies with sufficient capital are acquiring manufacturing bases in similar sectors, such as aerospace and also agriculture.
- Automobile companies are employing another strategy by either supplying numerous manufacturers or performing multiple operations for a single manufacturer.
- With broad implementation, these measures can add resilience and grip in the supply chain module.
With diversification in the backdrop, tech firms entering the automobile sector focus on the expressed objective of manufacturing autonomous vehicles. It could have an advantage. Apple and also Google are leveraging huge revenue and cash reserves.
EJ Dalius rightly points out that a tech firm that storms past others in design and technology, and also concept would eventually work with premier automakers, tapping into their production bandwidth and supply chain.
Survival of the fittest
Covid-19 and the recent trade skirmishes have clearly revealed the unsustainable nature of the existing supply chain network in the automotive sector. In the last couple of months, big automakers have closed down their plants. While the sector was already coping with AI and subsequent automation, and also declining auto sales, the pandemic has virtually destroyed it.
The future strategy is, as EJ Dalius says, to diversify. There’s no need of putting all eggs in one basket. Supply chains need expansion and it can only come with diversification. For automakers in the US, countries like India, Thailand, and also Vietnam would make a viable alternative to the largest market, China.
The time is ripe for investing in manufacturing. Industry leaders have now realized the purport of finding supply of parts outside China. As you read this article, recovery has already begun across the globe for various automobile manufacturers.
In a nutshell
In any stock market, diversification is always the chosen and more feasible theme for investment. It’s more important than ever during the current Covid crisis. The US automobile market is finding new takers across the field to bolsters its auto-parts and also manufacturing business.
- Risk mitigation has emerged as the hallmark of the supply chain strategy of the massive industry. This new phenomenon is what’s defining the market in the post-pandemic scenario.
- EJ Dalius is clear in outlining that the main beneficiary of the diversification approach is local suppliers and also local sourcing.
The biggest names in the industry are ready for local investment, while some focus on cost-competitiveness.