So we're in a recession, and there will be a recovery of some sort. Then what?
I've heard a lot of speculation about the future of the industry:
- People won't need personal vehicles anymore because now they know they can just work from home.
- Newly less-efficient manufacturing processes will squeeze margins and price more people out of the market.
- People will shun ride-hailing services for fear of infection or other uncleanliness.
Collie has some more nuanced suggestions for the changes that will follow this crisis:
Yes, manufacturing will become more expensive as shift-change schedules are adjusted and factory workspaces are spread out to accommodate social distancing. There's also the bigger issue of the fragility of the supply chain as this crisis reinforces the need for dual sourcing and backup plans that are so often given only lip service.
Supply-chain resiliency is "an important topic people are looking at," he said. "We'll see if this time they finally stick to their guns and actually value supply chain resiliency and actually make some conservative investments to provide for it."
While such moves may be a matter of question, there's far less doubt that a wave of consolidation is coming to the supply base. Many parts makers were already in a perilous state — generally no better off than they were heading into the global financial crisis. Now they're losing sales, and even if they can borrow money to restart operations, many will be weakened and in need of a partner.
"I expect to see some strategic consolidation occur," Collie said. "I also expect to see a number of [private-equity funds] stepping in and being a bit more active in the space."
Similarly, there could be a shakeout among mobility players. Those that are less well-funded — and those that are tied to automakers or suppliers now needing to focus on cash management — may be ripe for aggressive moves by tech-backed entities with ample funds.
Collie said the underlying long-term logic of autonomous, electrified and shared vehicles still makes sense, but some automakers will see those investments as luxuries that can't be supported — at least in the short run.
As dealer Aaron Zeigler told Automotive News: Recessions can be good buying opportunities. That looks to be as true for suppliers and tech companies as it is for dealers with strong balance sheets.
On the retail front, Collie sees a significant and likely permanent shift toward online sales. If the virus remains active and there is no vaccine for 12 to 18 months, dealers and their automaker partners will put significant resources into selling without showrooms.
"With any crisis, there's no shortage of lessons learned," he said. "Companies benefit tremendously by putting those lessons to work and coming out of it stronger, more resilient."