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Abstract
The coronavirus pandemic has had a devastating impact on various industries around the world, including the automotive industry. In this paper, the primary focus was to investigate the effect of the pandemic on the financial performance of companies in the automotive industry. The researcher collected data from secondary sources. Using mixed-method research to analyze primary data, it was possible to have a detailed explanation of the effects of the pandemic on the industry and how firms that survived it managed to do so. The investigation revealed that the pandemic paralyzed various operations in the industry. When it peaked in Europe, North America, and parts of Asia, many countries were forced to use lockdowns as the best strategy of limiting human interactions to help manage the spread of the virus. It meant that firms in the automotive industry, which can only operate when employees are physically present on the production floors, had to halt their operations. Sales revenue that these firms rely on were immediately lost because of the pandemic. The financial constraint forced some of these firms out of the market, while others that survived it are yet to fully recover.
Introduction
Background
The coronavirus pandemic has affected numerous industries around the world. According to Toubes and Araujo-Vila (2021), when the pandemic struck in the early months of 2020, the global community did not have an understanding of the virus and how effectively it could be managed. The use of facemasks and limited physical interactions were immediately proposed as the best ways of managing it. As it rapidly spread throughout Asia, Europe, and North America, it became evident that radical measures had to be taken as many lives were being lost. Lockdown was immediately suggested as the best way of significantly slowing down the spread of the virus and the associated fatalities. It meant that people could not go to work as has been the tradition. Only the few who could work from home were able to continue with their normal official duties.
The automotive industry was one of the worst affected sectors during the pandemic. Unlike in the service sector, employees in this industry are expected to be physically present in the production plants to facilitate normal operations (Korstanje, 2021). It is also not possible to avoid the physical interaction of individuals at these plants because of the nature of their work. As such, it meant that most of these production plants had to be shut down when governments around the world announced lockdowns (Giudice, Scuotto, Garcia-Perez, & Petruzzelli, 2019). The effect of such radical measures was immediately felt in the industry.
The halted operations meant that the revenues of these firms were equally halted. On the other hand, some of the expenses were not eliminated during the period. Security officers and a few maintenance crew had to report to work regularly. These firms were also required to pay particle salaries to their employees who were not working. Although the global community has rolled out vaccines, and companies in the automotive industry are back to full operations, the effect of the pandemic is still being felt. In this paper, the researcher seeks to investigate the effect of the COVID-19 pandemic on the financial performance of companies in the automotive industry.
Significance of the Study
The COVID-19 pandemic has had major financial implications for many automotive companies in Singapore and around the world. Some of the companies that were flourishing before the pandemic were forced out of the market as they could no longer meet their financial obligations. Others managed to overcome the struggle but are still facing a huge financial burden that is directly related to the pandemic. This study is important because it explains the effect of the pandemic and how firms in the industry were able to overcome it. The information makes it possible for the industry to have a better plan on how to deal with a similar pandemic that may occur in the future.
Research Questions
It was necessary to develop specific research questions to help guide the process of collecting data from various sources. The following are the research questions that the researcher seeks to respond to in this paper:
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How did the COVID-19 pandemic affect the global automotive industry?
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What was the effect of the COVID-19 pandemic on the financial performance of top companies in the industry?
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How does the effect of the pandemic on the automotive industry compare among different countries?
Literature Review
Introduction
The previous chapter has provided background information about the topic under investigation. In this chapter, the focus is to review the literature on this topic. As Haris, Chowdhury, Mohd, and Siti (2021) note, before collecting data, it is always advisable for one to review secondary data sources. It helps to understand what other scholars have found out in a given field, possible contradictions in the existing bodies of knowledge, and the gaps that should be addressed. A thorough review of the literature helps in avoiding duplicating already existing pieces of information. It also helps in developing a basis upon which new knowledge is based. In this section, it is necessary to review what other scholars have found out regarding the effect of the COVID-19 pandemic on the financial performance of companies in the automotive industry.
The Emergence and Spread of the COVID-19 Pandemic
Coronavirus 2019 was first reported in the Chinese city of Wuhan. It then spread very quickly to other parts of the country, and before it could be fully understood, it went beyond the borders of China. According to Helmold (2021), South Korea, Japan, and Thailand are the first countries outside mainland China to report cases of COVID-19. The virus then spread quickly to Europe and North America. In all the cases reported outside China, the victims had a history of having recently traveled from Wuhan or other parts of China. As the virus spread rapidly around the world, the number of deaths also started rising, especially in Europe and North America. Figure 2.1 below is a simulation of how the virus spread from Wuhan in China to the rest of the world.
When the pandemic struck, the medical global medical community was not fully prepared to deal with such a pandemic. Although there was a concerted effort to understand the nature of the virus and how it can be managed, the death toll was rising fast, especially in European countries such as Italy, Spain, and the United Kingdom, and North American countries such as the United States (Wynn, 2022). Measures such as the use of facemasks and limited human interactions were introduced to help slow down the rate of the spread. However, the death toll was still on the rise in most of these countries. It forced many countries, including Singapore, to introduce drastic measures such as total lockdowns to help slow down the spread (Tirkolaee, Sadeghi, Mooseloo, Vandchali, and Aeini, 2021)). In late 2020, the first vaccines had emerged to help contain the virus. The rapid rollout of the vaccine around the world has helped in reducing the fatalities and rate of the virus spread (Demir, Dalgic, & Ergen, 2021). However, the pandemic has left lasting financial implications in various industries around the world.
How the Automotive Industry Was Affected by the Pandemic
When the pandemic struck, the automotive industry was one of those that were worst affected. Bai (2020) explains that the effects of the pandemic were unprecedented and many major companies around the world were not prepared. The decision by the government to introduce either partial or total lockdown was the biggest blow that these firms faced. Kaeo-tad, Jeenanunta, Chumnumporn, Nitisahakul, & Sanprasert (2021) observe that even during the last two world wars, many companies around the world could still operate, something that was not possible during the peak period of this virus in North America, Europe, and parts of Asia (Muthukrishnan (2020). In the automotive industry, the pandemic directly affected the supply, demand, and innovation in this industry, as shown in figure 2.2 below.
One of the areas worst affected by the pandemic was the supply sector. When the death toll from the pandemic started to rise, many countries around the world were forced to introduce total lockdown. It meant that non-essential service providers were not allowed to move out of their homes. By definition, essential service providers included healthcare officers, security agents, and those working in the food, water, and energy sector (Xu, Elomri, Kerbache, & Omri, 2020). The directive meant that most of the suppliers in the automotive sector had to halt their operations because they were not classified as being essential. The global supply chain sector was disrupted by the virus. Those who were not affected by the lockdown directive opted to avoid going to work because of the fear of contracting the virus.
The demand for automotive products plummeted significantly during the period when the pandemic was at its peak. Schaltegger (2021) explains that many people were forced to stay indoors, limiting travel that was common before the pandemic. Those who had planned to purchase cars no longer had a good reason to do so because of the lockdowns. The demand for car parts also dropped significantly during the period (Ivanova & Dolgui, 2021). Many people had to keep their cars in their garages because of the cessation of movement that the government had issued. It meant that cases of car breakdown became less common.
A new trend emerged during the pandemic where people would work away from an office. Before the pandemic, the practice of working from home had begun but it was less common (Arribas-Ibar, Nylund, & Brem, 2021). However, the pandemic forced many institutions in the country to shut their operations. Many became innovative and allowed their employees to work from home. During the period, it emerged that some people tend to be more efficient when working from home. Time wasted preparing and traveling to the office could be spent completing specific assignments. Expenses at the office significantly dropped when people work from home. It was beneficial both to the employer and the employee (Kaitwade, 2021). As such, firms started encouraging their employees to work from home even when the economy was finally open. The effect of this new trend was that business travels in major cities around the world became less common. The trend has had a major impact on the sales of cars and car parts to different global markets. Although the industry has witnessed a slight growth, these effects are still felt by many companies.
The pandemic had a major impact on innovation in the automotive sector. According to Donthu and Gustafsson (2020), one of the causes of reduced innovativeness was the loss of some of the top talents in the industry. Some of those who lost their lives to the pandemic are experienced elderly employees responsible for product development and other major roles. Others developed a fear after witnessing the threat that the virus poses to their lives. They opted to go for early retirement as a way of reducing the possibility of contracting the virus (Aldrin, Erie, Mokhamad, Ardi, 2021). These factors led to a drastic drop in the number of top talents available in the industry. Replacing these experienced workers has not been easy for companies in this industry. The reduced innovativeness in the industry has a direct negative impact on the financial performance of these firms.
How the Effect of the Pandemic Compare Among Different Countries
The coronavirus pandemic has affected almost every country around the world, although the severity of the cases varies from one region to another. According to Ishida (2020), the virus was able to spread rapidly from China to neighboring countries and then to the entire world. Although the virus started in China, most of the fatalities were recorded in Europe and North America, especially in the United States (Seetharaman, 2020). Each country had to take containment measures based on the nature of the problem that they were facing. In Europe, especially in Italy, Spain, and the United Kingdom, the government was forced to limit the movement of people, especially those who were not offering essential services (Qiua, Jiang, Liu, Chen, Yuan, 2021). Every time a lockdown was announced, it meant that normal economic activities had to be stopped. In the United States, several states and cities had to be put under lockdown because of the same reasons. The following questions focused on determining how the effect of the pandemic on the automotive industry compares among different countries.
How does the effect of the pandemic on the automotive industry compare among different countries?
It was necessary to determine how the effect of the pandemic on the automotive industry compare among different countries. According to Kasni and Budiarta (2021), the effect of the pandemic was felt differently in different parts of the world. Developed nations in Europe and North America were able to protect major companies that were on the brink of bankruptcy. They were offered financial support to help them meet their urgent needs. The United States was one of the countries that offered direct financial support to companies that were in distress, as Kanca, Ginaya, and Astuti (2020) note. Japan is another country where the government was keen on protecting the automotive sector because of the role that they play in supporting the economy. Some of the largest car manufacturers in the world such as Toyota, Nissan, Mitsubishi, and Isuzu among others are Japanese firms (Baret, Celner, OReilly, & Shilling, 2020). As such, it was a governments priority to ensure that they are protected from the effects of the pandemic.
In some countries, the government did not play a direct role in financially assisting firms that faced distress during the pandemic. In Singapore, automotive dealers were forced to shut down their operations during the pandemic. However, Erdem (2020) explains that most of them did not get the financial support that manufacturers in developed countries received. The severity of the virus in China was not as bad as it was in Europe and North America (Onuorah, Alika, Okoh, 2022). As such, austerity measures that firms in this countrys automotive sector needed as not as dire as it was in other developed nations. In the United Kingdom, the pandemic had a major financial impact on the automotive sector. According to Purba, Simanjutak, Malau, Sholihat, and Ahmadi (2021), the British government did not officer direct financial support to some of the leading companies in this industry. However, they have since managed to overcome these effects and are back to normal operations, especially after the vaccine was rolled out.
How the Industry is Recovering from the Pandemic
The automotive industry, just like other sectors of the economy, has made a recovery from the effects of the coronavirus pandemic. Belhadi et al. (2021) explain that although the global community is still battling the pandemic, the introduction of vaccines has had a positive impact. Almost all the economies around the world have been opened up as the uptake of the vaccine continues to increase. The threat of contracting the virus even after taking the vaccine exists, as most of the leading manufacturers have explained (Xiong, Wu, Hou, & Zhang, 2020). However, the impact that the virus has is significantly reduced. The ease with which one can contract the virus is also reduced if one is vaccinated. As such, Devi, Warasniasih, Masdiantini, and Musmini (2020) explain that many companies have encouraged their employees to embrace the vaccine.
The recovery witnessed in the United States was motivated by government stimulus to help protect the industry. The state and federal governments have made direct purchases of locally manufactured cars to help increase their revenue stream (Christiansen & Skrinjaric, 2021). Such initiatives by governments have also been witnessed in Europe and parts of Asia. Some firms have also been using unique ways to ensure that they remain sustainable during the pandemic (Purwanto et al., 2020). Large corporations in the automotive industry used their assets to protect them from insolvency when the pandemic was at its peak. They have since resumed full operations as the global economy continues to grow (Singh, Wiktorsson, & Hauge, 2021). Although some firms are yet to achieve production levels that they realized before the pandemic, they are recording impressive growth.
Methodology
Introduction
Companies in the automotive industry are still reeling from the effects of COVID-19. The previous chapter has provided a review of literature on the topic, to help understand what other scholars have found out in their investigations. Data used in this study were collected from secondary sources. Secondary data was obtained from books, journals, company websites and reports, and reliable online sources. In this chapter, the focus is to explain the method that the researcher seeks to use to collect and process data from secondary sources. Issues about reliability, validity and ethical concerns have also been discussed in this chapter. The chapter enables readers to understand the steps that the researcher took to develop knowledge-based on information collected from secondary sources.
Research Method
When conducting academic research, one of the factors that have to be defined in clear terms is the research method. Processes, techniques, and strategies used to collect and process data should be explained (Breakwell, Wright, & Barnett, 2020). One can use qualitative, quantitative, or mixed research methods in a given study depending on the aim and objectives that have to be realized. In this study, the researcher considered mixed research methods as the most effective way of responding to the research questions and achieving the aim of the study. It was considered an effective research method that would facilitate a comprehensive analysis of the research questions outlined in the first chapter of this document.
Quantitative research methods make it possible to determine the magnitude of the impact of the COVID-19 pandemic on the financial performance of companies in the automotive industry. It is possible to understand how the selected firms have performed within a specific period. As Baporikar (2021) observes, the statistical analysis involved in quantitative research makes it possible to understand the degree of the impact within a specific period. On the other hand, qualitative methods make it possible to explain the impact. It goes beyond the statistical analysis to explain why a specific phenomenon occurred in a specific way and how different entities were affected. Using this approach to data analysis, it will be possible to explain why specific firms were affected by the pandemic and how they are coping with the effects.
Research Approach
When the research method has been determined, it is important to select the research approach that will be used to develop the knowledge. Just like the research method, an appropriate research approach should enable a researcher to respond to the aim and objectives of the study (Hennink, Hutter, & Bailey, 2020). One can use deductive, inductive, or abductive research approaches to facilitate knowledge development in the study. Howitt (2019) advises that it is also advisable to ensure that the selected approach is in line with the research method selected. In this study, the researcher considered the inductive method as the most reliable research approach that can facilitate an effective response to the research questions.
As shown in figure 3.1 above, this method does not require a researcher to develop a hypothesis or base the study upon a specific theory. Instead, one develops aims and objectives that need to be realized through the investigation. When using this approach, the researcher needs to understand the aim of the study. In this case, this project aimed to determine the effect of the COVID-19 pandemic on the financial performance of companies in the automotive industry. The first step is to conduct observations, which then leads to the development of patterns. The final step is to develop a theory or new knowledge based on the data collected. Through this study, the researcher outlined specific impacts of the pandemic and how firms in the automotive industry have dealt with it.
Research Studies
It has been explained in the section above that this was mixed-method research (both qualitative and quantitative). However, it can also be defined as exploratory and descriptive research. It is descriptive because it explains the specific characteristics of the phenomenon, which in this case is COVID-19, and how they affected the industry (Hennink et al., 2020). It explained in detail what the effect of the pandemic was on firms in the industry. It is also explanatory because it explains why the specific phenomenon affected the firms. It was necessary to explain why the pandemic affected these firms in the stated ways. The explanations help in determining how firms can avoid these effects in the future in case a similar pandemic occurs.
Data Collection and Analysis
Collecting and analyzing data helps to directly respond to the research questions and in addressing the identified knowledge gaps. Secondary data was used because of the limited time available for this project and other COVID-19 related complications. Baporikar (2021) warns that when collecting data, it is essential to remain objective and to focus on the aim of the study because sometimes one can end up gathering vast information that does not address the goal of the research. The method selected for the study also defines the nature of the questions used. In this study, the researcher developed research questions to facilitate the process of data collection. Questions used in this document were both closed-ended (structured) and open-ended (unstructured). Using the two formats of questions made it possible to collect data that could respond to the research questions in details. The researcher collected secondary data and processed it using mixed-method research. Qualitative data processing involved thematic analysis to understand the effect of the pandemic on the financial performance of the companies in the automotive industry.
Different Research Methods
It is possible to use a wide range of research methods depending on the objectives that have to be achieved and the time available for the study. In this project, one of the research methods that would be appropriate, besides those that were selected and discussed above, is the use of a case study. It involves selecting a specific organization and analyzing how a specific phenomenon affected it (Breakwell et al., 2020). It would involve selecting a company in the automotive industry and analyzing how it was affected by the pandemic. However, this method was not used in this study. Another potential method would be content analysis, which primarily focuses on the use of documents and artifacts (Hennink et al., 2020). This method was used only in the literature review part of this report.
Reliability and Validity
Reliability and validity concerns should be effectively addressed in a report to ensure that it is trustworthy. Reliability focuses on the consistency of results or how the outcome can be reproduced if the same methods are used (Howitt, 2019). In this study, reliability was enhanced by ensuring that a specific method, discussed above, was strictly observed when collecting and processing data from various sources. On the other hand, validity focuses on the truthfulness of the outcome or the extent to which outcomes of a study measure that which it is expected to measure (Baporikar, 2021). The researcher used data from various sources to respond to the aim and objectives of the study. Triangulation, which involved data collection from various sources, made it possible to have a detailed collection of information from the identified sources.
Ethical Considerations
It is a cardinal responsibility of a researcher to observe ethical requirements throughout the study. One of the ethical considerations when collecting secondary data is to ensure that they are reliable (Breakwell et al., 2020). A researcher is expected to ensure that the identified source is trustworthy before using the information to present findings. As such, reliability and validity of all the sources used, including information from company websites and newspapers, was emphasized. The use of a large number of peer-reviewed journals was also meant to enhance the reliability of information obtained from secondary sources. As an academic document, the researcher avoided all forms of plagiarism. Information obtained from secondary sources was correctly cited using APA referencing style. It was it was also ethically important to ensure that the document was completed within the period that the supervisor provided.
Conclusions
The chapter has discussed the method that the researcher used to collect and analyze data from secondary sources. As explained in this chapter, the researcher relied on secondary data because it does not require any form of approval. The research approach has also been explained to help readers to understand how new knowledge was developed in this research. It was necessary to explain alternative research studies which can be used by other scholars when conducting similar research. In this project, the researcher used mixed-method research to conduct a comprehensive analysis of the effect of the pandemic on the financial performance of companies in the automotive industry. Reliability, validity, and ethical concerns were also discussed in this paper.
Data Analysis and Findings and Discussion
Introduction
The previous chapter discussed methods that were used to collect and process data in this study. In this chapter, the focus is to present and discuss findings made from the analysis of secondary data. As Sattler (2020) observes, when analyzing secondary data, care should be taken to ensure that it directly responds to research questions. In this chapter, the researcher directly responds to the three questions that were developed in this study based on the secondary data collected. As explained in the previous chapter, the data collected was analyzed both qualitatively and quantitatively.
Data Analysis and Findings
Secondary data was obtained from published sources, electronic records, government records, and reliable websites on the internet. Information obtained from these secondary sources was processed both qualitatively and quantitatively. Question one below was processed qualitatively to have a detailed understanding of the effect of the pandemic on the automotive industry. Using data gathered from secondary sources, the researcher considered thematic analysis as the most effective way of presenting findings.
How did the COVID-19 pandemic affect the global automotive industry?
It was necessary to explain how the pandemic affected the global automotive industry. Thematic analysis was considered appropriate when answering this question. The researcher used open-ended questions, in this case, to make it possible to provide a detailed response to the question. Using data obtained from secondary sources, it was possible to explain in details how the global automotive industry was affected by the pandemic. It is important to note that the global community has not rid itself of the pandemic, and some of its effects are still being felt.
Significant reduction in the purchase of vehicles. The researcher reviewed data from various pages of major companies in the industry to understand how they have been affected by the pandemic. One of the major effects on the industry that was clearly evident from the analysis is the reduced purchase of vehicles, especially during the peak of pandemic. Data from these sources revealed that at the peak of the pandemic, governments around the world, especially in Europe, North America, and parts of Asia introduced stringent rules to help manage the spread of the virus. One of the containment measures was lockdown, which became common in Europe, China, India, and the United States, which are some of the major markets (Sillars, 2021). It meant that people could not move out of their houses unless they were essential service providers. The need to own cars became increasingly reduced as many people would spend most of their time indoors. The outcome of the new lifestyle was a sharp drop in the purchase of cars during the period.
Secondary data also revealed that the pandemic led to the growth in the number of people working remotely from home. It meant that they no longer needed to move from their homes to their workplaces to undertake their official duties. As the need to travel regularly reduced, the demand for vehicles also dropped (Audi Group, 2020). It was also evident that during this period, many people focused on buying the basics as the future became uncertain. All these factors had a major negative impact on the demand for vehicles around the world. Although the industry is currently witnessing a recovery, as Sattler (2020) observes, it may take some time before sales can outperform the period before the pandemic. A section of the society is currently focusing on making financial recovery after the major losses they suffered during the pandemic.
Reduced demand for car parts. The information obtained from secondary sources strongly indicated that there was a significant drop in the purchase of car parts, which is another major product portfolio for many firms in the automotive industry. According to Sillars (2021), many companies recorded a significant drop in the sake if car parts as soon as the virus started spreading rapidly in Europe, North America, parts of Asia, and the rest of the world. The pandemic forced many people to spend time indoors without traveling. It meant that most cars did not require constant repair as they were always in the garage. Sattler (2020) explains that the need for people to regularly visit repair shops because of wear and tear or accidents significantly dropped during the period. In many countries, only trucks transporting essential products such as food and medicine were allowed to be on the road. It was a major blow to the manufacturer and suppliers of car parts all over the world (Audi Group, 2020). Besides the drop in demand, most of the car repair shops in the country and many parts of the world were shut for some time during this period, which further affected the demand for the products. A report by Sillars (2021) show that the company was forced to stop the pr
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