How Will The Covid-19 Pandemic Change Transportation?

The Covid-19 pandemic is changing how we shop and work resulting in significant effects to the economy.  Rapid changes are also likely to come about in the transportation industry. We look here at the following 5 areas that are most likely to see these changes.

 

Supply Chains

Automotive supply chains are very complex since each vehicle has thousands of parts sourced and transported from thousands of different suppliers possibly located in different regions and at great distances from the actual manufacturing site. Automakers will have to revisit and look at their supply chains to identify issues and vulnerabilities in cases of potential disruptions not only natural; but, intentional, such as global shutdowns as we experienced with the Covid-19.  Companies will also need to look at geopolitical environments such as tariff relationships and sole source countries/regions. They will have to evaluate various alternatives and look for opportunities to simplify their supply chains by working with a reduced list of suppliers closer to the actual manufacturing location.

 

E-Commerce Business

As people remain sheltered in their homes, online shopping has surged as shoppers drastically reduce actual brick and mortar store visits in local shopping malls. According to the market research firm Rakuten Intelligence, e-commerce spending is up by more than 30% from the beginning of March through mid-April compared with the same period last year. According to GlobalWebIndex’s coronavirus research, nearly half of global consumers say they will not return to shops for some time after the lockdown ends. This change in behavior could lead to the need for more last mile delivery services which will significantly affect traffic patterns in residential areas. And, in the experience with COVID-19, last mile delivery is challenging the capacity of parcel services and increasing delivery times. Estimated Delivery Dates (EDD) are moving targets. Will consumers be willing to accept uncertain delivery and wait 5-10 days for delivery of their orders, especially when the brick and mortar retailer has it in stock for curbside pick up?

 

Heavy Auto (Truck) Sales

Oil Prices have fallen dramatically this year. As the coronavirus induced lockdowns have drastically reduced demand for fuel, Brent and US West Texas Intermediate crude both fell to below $20 this year, more than 60 per cent lower than at the end of 2019.  At one point, you could be paid to order oil. Lower fuel prices help bolster the sales of less fuel-efficient vehicles like trucks and SUVs. Furthermore, the potential for a $2 trillion U.S. infrastructure spend would add to this trend as trucks would play a key role in transporting material and supplies needed by contractors in large construction projects.

 

Light Vehicle Sales

Prior to the pandemic, the number of people regularly working from home was in the single digits. However, now working from home may be the new normal for many. According to a new MIT report, 34 percent of Americans who previously commuted to work were working from home by the first week of April due to the coronavirus. As the coronavirus takes a steep toll on the economy, many in the workforce will be unemployed and some others who are still employed will now choose to permanently work from home. Such a change could cause auto sales to trend down.

 

Ride Sharing

Even before the pandemic there were several challenges facing ridesharing companies: Growing Competition; Government Regulations; Lawsuits; Labor Issues; and, Profitability are just some of the challenges. Safety was also a key concern for both the driver and the rider. The COVID-19 will reduce a person’s desire to share vehicles with other passengers or to get on to vehicles occupied by unknown people on previous trips. The concerns of sharing a vehicle used by others multiple times could also lead to lower car rentals. This behavior could also lower ridership on other forms of mass transit for example, buses, trains, and airplanes.

 

Conclusion

The COVID-19 experience, if nothing else, should motivate senior executives to rethink their purpose and their strategies. Besides exposing the vulnerabilities stated above, strategic vulnerabilities based on optimizing cost with the purpose of profit may prove to be an Achilles heel for many organizations. Executives have to rethink their strategy and business model for continuity and value, not simply cost expedience.

 

 

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