Having battled to cope with sudden disruptions to the automotive supply chain caused by the coronavirus pandemic, logistics providers are now looking at the more permanent changes to the sector that the continued threat of the virus poses.
However, there are positive prospects for the industry as a whole to reinvent itself and build toward an electrified and digital future.
According to Bruno Constans, marketing and innovation director at logistics provider Gefco, when the Covid-19 crisis hit the company drew on its established expertise in emergency logistics through its Time Critical Solutions division to divert flows and find alternative sources for inbound parts.
“It has always been very strong in this company because it is part of the DNA of Gefco to manage crises,” he said. “It has been part of the history of Gefco with Groupe PSA many times.”
The focus now, however, is what permanent changes Covid-19 is bringing to the market. One example is in the sanitisation of the finished vehicle and all that relates to a high standard in the delivery of the car to the end user.
“This is something more and more people are cautious about,” said Constans. “It is something we have had to optimise in record time inhouse to be able to provide to the OEMs and other customers the right solution.”
However, the industry also has big obstacles to overcome in emerging from the crisis as a cleaner and more digital industry because of the impact the crisis has had on finances. Revenues have been hit severely and production is restarting at a very low level. New vehicle sales are going to be 15% to 25% down this year on what they were in 2019. That means having less money to invest in electric and autonomous vehicle technologies, which are costly.
There are also more immediate problems in the supply of lithium batteries for European production of EVs, the majority of which come from Asia. It takes 40+ days to transport batteries from China to Europe, for instance, and the east to west spread of Covid-19 means Europe was closing its borders even as China was reopening, further delaying supply.
As plants in Europe tentatively reopen, the health and safety standards, already stringent for handling batteries, must be adapted to ensure that they correspond to new production realities, said Constans. It is likely that shutdowns will continue as subsequent resurgences of the virus are controlled.
Coronavirus containment measures continue to affect all facets of the supply chain, and battery raw materials markets in particular face an immediate challenge, according to Michael Pohl, vice-president, Commercial Chemicals, at logistics provider Imperial.
“China’s major Li-ion manufacturing players, CATL and BYD, are faced with a high probability of additional production delays,” said Pohl. “China’s attempts to fight the coronavirus spread have led to delayed production across a number of battery production facilities located in key coronavirus-hit provinces.”
However, there are positive side-effects of the pandemic, according to Pohl, including the move to reassess globalised EV supply chains.
“The industry is currently heavily reliant on China, not just for battery-grade chemicals, but also precursors, cathodes and anode materials,” he said. “A move to develop localised supply chains could reduce exposure to supply chain disruptions and currency fluctuations, shorten lead times and reduce carbon footprints.”
Another positive side-effect of the pandemic is the consumer’s embrace of digital channels for purchasing over the pandemic lockdown and the response of the sales departments at the carmakers to commercialise their products through those channels.
“People have embraced digitalisation since they have been locked down, much faster than it was three months ago,” he said. “It might be that in the near future a big proportion of the consumer base is going to order their cars on the web.”
Gefco is already delivering vehicles to the end user through its Moveecar service, which was announced in October last year and it is able to build on years of experience in providing vehicle quality inspections.
“For instance, when we get vehicles from rental companies, we clean them and do the checking and appraisal of the car, and then sometimes the refurbishment,” he says. “We have the knowhow inhouse and the only difference now is the spread of the market. What was niche is becoming a bigger B2C market.”