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For the auto industry, the pandemic changed everything

In an instant, everything went quiet: the freeways, the factories, the showrooms.
Workers leave FCA Chrysler Warren Truck Assembly after the Detroit three automakers have agreed to UAW demands to shut down all North America plants as a precaution against coronavirus on March 18, 2020 in Detroit.
Workers leave FCA Chrysler Warren Truck Assembly on March 18, 2020 in Detroit.Jeff Kowalsky / AFP via Getty Images file

In an instant, everything went quiet: the freeways, the factories, the showrooms. The arrival of the “novel coronavirus” a year ago slammed the automotive world.

In cities like Los Angeles, Chicago and Atlanta, traffic plunged by more than 70 percent as the nation went into lockdown. The shutdown of North American automotive production put hundreds of thousands of workers on unemployment. But more new cars weren’t needed at showrooms, anyway, as U.S. sales plunged 40 percent within a month.

A year later, a casual glimpse suggests the industry has bounced back to normal. Look more closely and it is clear nothing will be quite the same going forward. Automotive retailing is going on line. Factories have been reconfigured to cope with Covid-19 restrictions. But shortages remain an issue. As for traffic, it’s up, but commuting is easier because tens of millions of Americans continue working from home.

The pandemic effects started with automakers sending their office workers home last March. Within weeks, factories were shuttered all across North America, sending U.S. unemployment rates sky high.

Starting back up two months later was initially hit or miss. New protocols had to be implemented to keep workers safe on the factory floor. That was no easy task, considering the complex tasks workers have to complete.

Production largely recovered, with most assembly lines running flat out. Or, at least they were until January, when a global shortage of microprocessor chips brought assembly lines to a halt.

When automakers slashed production forecasts last spring, chipmakers found alternative customers. Stuck at home, Americans were springing for web cams, laptop computers, video games and smart phones. Now, the auto industry is getting the short end of the stick. The situation is dire enough that President Joe Biden has now launched an initiative to boost domestic chip production.

The chip shortage has only exacerbated efforts to refill dealer inventory. Depleted by last spring’s auto plant closures, there currently are about 1 million fewer vehicles on dealer lots than would be normal this time of year, according to IHS Markit. That makes it hard for buyers in some parts of the country to find what they want.

Some states took longer to reopen showrooms than factories. Desperate to start selling vehicles again, dealers and automakers shifted marketing efforts to online sales. At least 80 percent of car buyers now are using laptop or smartphone apps during some part of the shopping process, reports J.D. Power. More and more are completing the entire transaction virtually, with dealers then dropping vehicles off at a buyer’s home or office.

“We’re two to three years ahead” of where the shift to online sales seemed headed before the pandemic, said Mark LaNeve, the recently retired head of sales, service and marketing at Ford.

Last but not least, ride-sharing was widely expected to cut into car sales over the coming decade. Millions of car owners were forecast to switch to using services like Uber or Lyft, as well as mass transit. For now, at least, car dealers across the country report seeing new customers who want the safety of riding in their own cocoon.