The last couple of years have been challenging for a broad range of industries and the pandemic has been particularly difficult for the automotive industry as its supply chain is one of the most complex in the world.
From the operational concerns caused by Brexit and the closure of China’s manufacturing industry during the pandemic, to mounting supply shortages, the automotive industry has been left bruised by the events of the last two years.
With Brexit and the pandemic exposing the vulnerability of global supply chains, the role of third-party logistics is now more important than ever before.
So, we’ve had a look at some of the biggest challenges facing the automotive industry in 2022 and how logistics is playing a critical role in its post-pandemic recovery.
Global manufacturing shutdowns represented one of the most significant challenges within the automotive industry during the pandemic.
The introduction of social distancing measures and nationwide lockdowns led to large financial losses, even after production recommenced in 2021.
With Europe and the United States still struggling to get back to regular car production, experts say manufacturing shutdowns may continue to remain one of the most critical challenges facing the automotive industry.
The service that third-party logistics providers offer is even more critical in the aftermath of a global pandemic, when businesses including car manufacturers play catch up.
Dealing with significant backlogs of orders, logistics companies are now heavily relied upon to get stock to customers.
As a leading logistics provider, we know that the fast and reliable shipment of goods is essential and we adapt our services to match the requirements of our customers.
Disrupted supply chain
One of the most vital challenges faced by the automotive industry during Covid was the worldwide disruption of supply chains.
With its ‘just-in-time’ operations, car manufacturing heavily relies on supply chains that come together as and when production requires – meaning even the smallest disruption can have a long-lasting knock-on effect.
More often than not, supply chains are spread internationally, and with every country imposing its own post-pandemic protocol, supply chain management took a huge hit.
Facing more than just disorganisation and disruption caused by Covid, automotive supply chains now have to burden various bottlenecks, such as the one relating to semiconductor – or microchip – manufacturing.
With logistics being the backbone of supply chains, we know our role is now more important than ever. Our customers will be looking to us to help rebuild their supply chains and make them less vulnerable in the future.
Global shortage of microchips
An industry that was already laced with long-standing issues, such as insufficient capacity, Covid both exposed and exacerbated the global shortage of semiconductors.
Semiconductors are small microchips required for a number of electronic functions within cars, such as lighting or seat control, and hence form a vital part of the global car production.
Car manufacturers cut their chip orders in the first half of 2020 due to plummeting car sales but, when sales recovered quicker than anticipated, supply became an issue – even bringing some car manufacturing to a complete halt.
With widespread efforts to lessen the impact of global supply-chain disruptions – such as some governments upping their investment in semiconductor technology – there will be heavy reliance on third-party logistics providers to help recover supply.
With more than half a century of experience in moving goods for businesses of all types and sizes, we at Freightline have the knowledge and are ideally placed to step up when required.
Vehicle supply and demand
One of the key challenges facing the automotive industry during Covid has been the dramatic change in new car supply and demand.
The general uncertainty felt by everyone across the UK and most of the developed world at the start of the pandemic initially brought on a rapid drop in demand.
Whilst this doesn’t come as a surprise, with buying a new car not particularly high on people’s priority lists during a global pandemic, the numbers are still somewhat of a shock.
According to the Society of Motoring Manufacturers and Traders, the UK automotive industry lost £1.3b in sales in 2020, leading to large amounts of excess stock, high levels of debt and ongoing demand uncertainty.
Then, with demand for cars increasing again as we come out of the pandemic, supply of new cars has been hit by shortages or delays of automotive parts, in particular the global shortage of semiconductors from China.
As supply and demand balance out again in time, there now is an even bigger requirement for a globally resilient chain of supply and effective third-party logistics services to ensure on-time delivery of goods.
Change in customer behaviour
With a weakened economy, price increases and high levels of general uncertainty, a global pandemic brings with it a significant shift in customer behaviour.
It’s particularly easy to see how this would impact the automotive industry, with people less likely to purchase cars during times of uncertainty.
As one of the ways to overcome the profit hole left partly by the shift in customer behaviour, many car manufacturers attempted to make car purchases digital by, for example, offering short-term subscription-based lease models for customers.
Despite a resurgence of sales in 2021, customer footfall still remains low and is likely to continue to represent one of the most critical challenges for the automotive industry in years to come.
To navigate the ongoing challenges of the Covid aftermath, one of the key measures that businesses within the automotive industry will be looking at is building a more resilient supply chain. Adapting supply chains as well as logistics services to a new way of working is key.
At Freightline, we are used to ever-changing circumstances and know how to react quickly to ensure there is minimal disruption to the delivery of your goods.
Backed by over 50 years of experience and trusted by over 350 satisfied clients, we provide third-party logistics services you can depend on, even in unprecedented times.
Freightline provides a logistics service you can rely on
At Freightline, we’re market-leading logistics experts, specialising in the urgent and time-critical movement of goods and products.
With reach across the UK, Europe and beyond, we are a leading logistics provider to numerous market-leading companies across multiple industry sectors.
Our dedicated account managers ensure that your shipments are collected and delivered safely and on time – because we understand the deadlines you have to meet.
Particularly with an economic climate dominated by uncertainty as well as supply chain challenges, being able to rely on a third-party logistics provider is more important than ever.
With our expertise and first-class customer service, we ensure your goods are delivered quickly and cost-effectively, 24/7, 365 days a year.