Automotive Industry Eyes Slow Recovery

After a long-winded lockdown, U.S. auto-manufacturers are finally reopening. 

The move to reopen comes with debate, however; for example, Tesla Inc TSLA CEO, Elon Musk, sued Alameda County, California and threatened to move the company's headquarters to another state after he encountered resistance against a decision to restart assembly.

Now that most other U.S. carmakers such as General Motors Company GM, Ford Motor Company F, and Fiat Chrysler Automobiles N.V. FCAU are returning, sights are back on the supply and demand dynamics of the recovering market.

The following is a look at the challenges that lie ahead. 

Pandemic Deals A Heavy Blow

From 2.62 million units in February, U.S. car production in March dropped to 1.7 million, with European output falling at least 1.2 million by late April.

The WTO estimated that U.S. auto sales were almost 40% off in March after China suffered an 80% sales dip in February.

For the remainder of 2020, research suggests a 12-15% drop in global sales, a $5.7 billion hit on an already hurt auto industry.

Specialized Equipment Market Weathers Turmoil

AutoZone Inc AZO reported third-quarter earnings today with the stock surging after both its profit and sales beat expectations. With net sales of $2.8 billion for its third quarter that ended on May 9, 2020, the company's strong balance sheet, along with substantial free cash flow, is showing significant financial flexibility. Net income, however, fell from $405.9 million in the same period last year to $342.9 million resulting in $14.39 a share.

Challenges Persist

The complexity of global supply chains is what made automakers most prone to damage from the pandemic.

With an ongoing lockdown in Mexico, the location of major suppliers, it may take months for the supply chain to be fully functional again.

With the fundamental demand characteristics of the industry changing due to the transition to electric vehicles and automation, the skies ahead are anything but clear for incumbent U.S. automakers.

This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com Questions about this release can be sent to ivana@iamnewswire.com

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