What emergence of new Covid variant may mean for auto industry

Covid cases are once again on the rise in several countries across the globe with many pressing the alarm bells loud and clear. The World Health Organization (WHO) has named a new Covid variant as Omicron and the effectiveness of vaccines against it is still being examined. But while the rising number of cases has once again emerged as a multi-faceted threat to countries and people, it may well be particularly concerning for the global automotive industry that is anyway dealing with a crippling crisis in availability of semiconductor chip.

While demand for automobile has been on an upswing in most major automotive markets in recent months, supply has been a concern as production cycles remain affecting owing to the global shortage in semiconductor chip. But will the emergence of a new Covid variant now also affect positive demand trends?

Rising economic uncertainties and health scare stemming from Covid and the consequent lockdown has an adverse impact on a large number of sectors - from tourism to hospitality and even automobiles. The stringency of lockdown and its possible duration means that the impact on demand and production of personal mobility options tend to vary from country to country. As per a McKinsey research back in late 2020, demand for vehicles fell during the second wave in Europe but this fall was significantly higher in Germany, Italy and the United Kingdom vis-a-vis France and Spain.

Across the Atlantic, in the United States, restrictions have been less severe in the past but even then, demand for newer vehicles is likely to be impacted by new variant detection.

China, the world's largest automotive market, tends to have an iron grip over outbreaks but that may also mean a noticeable degree of impact on sales which have been gaining momentum for some time now. The new variant isn't likely to help matters.

The recovery of the Indian automotive industry has been resilient with demand picking pace. Even though the festive period of October and November were nowhere as cheerful for auto players as in the past, the demand has been recovering even if supply-chain issues persist. But Prime Minister Narendra Modi has already advised caution against the new Covid-19 variant. The country has seen two lockdowns - one was across the nation in 2020 and the other was more at state levels this year. A lockdown in coming times may once again slam the brakes on the automotive sector, apart from its other widespread implications.