*WINNER* Car Crash: The effect of COVID-19 on Supply and Demand in the Automotive Industry

Abstract

The global response to the Covid-19 pandemic had a substantial impact on supply in the auto manufacturing sector as governmental responses caused rolling halts in automotive production. At the same time, the surge to 14% unemployment coupled with the economic uncertainty changed consumer spending habits impacting demand. We analyzed the quarterly financial statements of five companies from three different stops on the supply chain: Tier 1 automotive suppliers, automotive retailers, and automotive aftermarket retailers from Q2, 2017 to Q4, 2020. We hypothesized that (1) disruptions in the supply chain would impact Tier 1 automotive suppliers as their production and revenue are directly tied to the automotive OEMs and (2) automotive retailers and the aftermarket industry would be affected by the inconsistent demand caused by the pandemic. We found that revenue and profit margin decreased for Tier 1 Suppliers in the quarters following governmental regulations on COVID-19, as Tier 1 and OEM plants began to slow production. In the same period, automotive retailers saw a significant decline in revenue and profit margin, while the aftermarket industry saw unprecedented demand for their products. Unemployment and economic uncertainty may reveal why consumers decided to stray away from new vehicle purchases, and instead spent money in the aftermarket industry to repair vehicles they already own. As the country began to open and consumers became more secure, the data suggests that supply and demand increased for both Tier 1 Suppliers and Automotive Retailers, while the Aftermarket industry slowed to pre-pandemic levels.