23 Mar 20

COVID-19 unlikely to just blow over in Europe

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The automotive, logistics, travel and mobility ecosystem is immensely impacted by the spreading coronavirus. The uncertainty about both its amplitude and the timeframe when it will be over will lead to a ‘bad’ mobility year 2020. New car sales will drop, travel and rental companies will be decimated because their core business has largely been put on hold, and people will become more and more sceptical for shared mobility and public transport.

The short-term rental industry is being hard hit in particular. “In the Netherlands, revenue has gone down 60%,” said Luberto van Buiten, editor-in-chief with Mobility Media in the Netherlands, publisher of Fleet & Mobility and Automotive Management. Similar drops are being reported in many other markets.

Rental companies are cancelling orders and sending back vehicles sooner than planned. Leasing companies have stopped ordering new vehicles, instead preferring to extend existing contracts.

Residual values

No industry is being spared and indeed the used-car market is taking a blow as well. As people stop buying cars, whether new or used, leasing companies worry they may not be able to off-load their vehicles at the end of their contracts. This could impact residual values and limit the cashflow of leasing companies.

On the longer term, this crisis could slow down the growth of the EV segment which we were all expecting in 2020. As fewer new cars enter the market, fewer new EVs will replace older ICE cars.

More people are working from home than ever before. As companies experience how well this can work in many scenarios, they could implement strategies to limit trips and to introduce policies for working from home systematically. In the longer term, this could lead to lower mobility demand.

"The need for mobility may decrease, which could lead to better COfootprints in the fleet and mobility industry," said Immanuel Schneeberger, editor at Firmenauto. He sees another silver lining: "Now is the time to make decisions regarding car policies: companies now have time to think about green car policies, which could include increasing the number of plug-in and electric vehicles. Also, prices for those vehicles could drop: carmakers need to meet ther CO2 goals, and with almost no registrations today and in the months to come,  there is a lot of catching up to do."

Government assistance

Tomasz Siwiński, editor-in chief of FLEET Magazine in Poland, reports industry associations and various companies are pleading with national governments to support financial institutions (including leasing companies) and other struggling industries.

The UK government has promised a comprehensive package of financial and tax support to help businesses survive, and the vehicle rental industry is emphasising how important it it to keep trading throughout the crisis.

“As the government considers the measures it might take to limit the impact of COVID-19, it is vital that it appreciates the role that will be played by rental vehicles in maintaining the essential movement of people, goods and services,” said Gerry Keaney, BVRLA Chief Executive.

“Any plans to restrict business or transport must exclude vehicle rental. We have already seen the sector exempted from such closures in France, Austria and Spain, due to its essential role in providing mobility.”

The coronavirus crisis could also have a detrimental effect on investments in electrifying fleets, in digitised customer experiences or in autonomous technology. As companies are struggling for their very survival, coming up with new products and services may drop on their priority list. “Themes like the autonomous vehicle will be an anecdote,” said Hugo Jorge, editor-in-chief of Fleet Magazine Portugal.

We will not go back to business as usual the day or the week after COVID-19 has been conquered. However, individuals and employees will still have mobilility needs after the end of the coronavirus. An uptake in fleet and mobility can be expected once COVID-19 is behind us, but some things might be here to stay. First of all, the increasing use of new ways of working with the support of meeting technology and digitisation. Secondly, the attention for health and healthcare, also in mobility. And finally, the period right after the coronavirus crisis will see an increased focus of businesses on cost efficiency, which could at one hand accelerate the search for international opportunities through economies of scale but which could also delay the adaption of innovation in fleet electrification and smart mobility for the entire workfloor.

Image: Volkswagen factory, Wolfsburg (copyright: Shutterstock)

Author: Steven Schoefs, Benjamin Uyttebroeck and Jonathan Manning

Article based on contributions of Euro Mobility & Fleet Network partners: Fleet & Mobility (the Netherlands), FLEET (Poland) and Fleet Magazine (Portugal), Firmenauto (Germany).