COVID-19 Shatters global automotive industry; Sales of metal powder take a nosedive amid wavering demand

Abstract

Before the COVID-19 pandemic emerged, the automotive industry was projected to witness steady growth through the course of this decade. Automotive industry is an important revenue contributor in both emerging and developed economies of the world. Automotive industry is often considered the backbone of Gross Domestic Product (GDP) of the countries. Hence, solid economic growth heavily relies on how well the automotive industry is performing in a region. Rising disposable income of consumers is amongst the major growth levers of the automotive industry. Whether it is the heightening demand for electric vehicles or rapid innovations, the automotive industry had been burgeoning before it was put to halt by the SARS-CoV-2 outbreak. However, the industry had been facing critical challenges even before the pandemic began. 1 State of Automotive Industry before the Pandemic: Drivers and Restraints Environmental implications associated with the growing usage of conventional automotive vehicles are raising the concerns of governments and activists across the globe. For this reason, governments worldwide have been offering subsidies for using electric vehicles. Conventional vehicles have long been the major pollution sources and hence their usage is going to decline within this decade. Consequently, technologically advanced vehicles are gaining traction on the back of greater economic wealth of consumers, particularly in developed nations. Moreover, US-China trade war along with widespread economic slowdown was another challenge being faced by the global automotive industry apart from environmental concerns. In India, rising Goods and Services Tax (GST) imposed on automobile vehicles is significantly affecting the growth of industry in the region. 2 Leading Players Halt Their Operations amid COVID-19 Outbreak An industry which was already facing the brunt of global economic slowdown, rising taxes, US-China trade war, and strict environmental regulations, the fallout was greater when COVID-19 pandemic struck the world. The automotive industry had not yet recovered from the repetitive blows in 2019. Quarantined workforces, widespread shutdown of business, and disrupted supply chain ultimately flatlined the automotive industry. For instance, top players in the automotive industry such as Tesla, Toyota, Hyundai, and Volkswagen AG had to cease their operations in their several production plants. This move by leading manufacturers led to further downfall of the automotive industry. China, which is a prominent assembling hub, imposed lockdown in Hubei province leading to closure of production plants in the region. This was the predominant cause of supply chain disruption in the automotive industry. China is the leading exporter of automotive components as well which forced the key players to shut down their business when Coronavirus began to spread. The country leads the automotive industry both in terms of production and consumption. Hence, the stringent lockdown led to the paucity of semi-finished automotive components. 3 COVID-19: Monumental Consequences on Metal Powder Sector The consumer demand has declined dramatically as their expenditure has majorly diverted towards purchasing only essentials to survive the lockdown. In addition, closure of manufacturing plants has dampened the sales of metal powder. The finished automotive products cannot be manufactured without the use of base materials called metal powders. Whether it is additive manufacturing or conventional metallurgy, metal powders have an indispensable role in the automotive industry. Metal powders define the characteristics or features of the finished product. The quality, versatility, and cost competitive nature of metal powders had been driving their consumption in automotive industry. For instance, manufacturers prefer iron powder for making brake pads and magnetic products while nickel powder is an inherent part of marine industry for making corrosion resistant components. Aluminium powder on the other hand is used for manufacturing metallic paints. The growth of metal powder sector has been severely affected by dwindling sales of vehicles in the wake of COVID-19 pandemic. As a result, the prices have been fluctuating as well. Niche players in the global automotive industry continue to analyse the COVID-19 impact on their operations and supply chain management. They are implementing business continuity plans to prevent the complete collapse of their operations, never to recover. Key stakeholders must evaluate their supplier risk programs and determine their suitability for current business scenario. Moreover, they must synchronize logistics and manufacturing along with re-positioning their inventory. 4 Major Manufacturers Undertake Crisis Management Strategies amid Rising Consumer Uncertainty Besides dealing with falling sales, top companies in the global automotive industry have to deal with the possibility of employee infections. Minimizing the staff COVID-19 risks along with managing remote client interactions remains the top priority of leading players. Moreover, top metal powder manufacturers are aggressively focusing on working capital and liquidity. On the other hand, governments are rolling out legislative stimulus plans to support the industry. Hence, companies in metal powder sector must evaluate the challenges and opportunities associated with the stimulus plans. The impairment caused by COVID-19 pandemic needs to be examined in order to optimize production. Moreover, companies should review their inventory to sell their existing stocks at the minimum. The current situation is expected to persist through latter half of 2020. The end of this pandemic now relies on the combination of herd immunity and vaccination approval. This would take another year, approximately 12-18 months before the commercialization and mass production of potential vaccine can be realized. However, the revival of automotive industry is possible by containment measures such as self-isolation, institutional quarantine and strict lockdown. If the rapid spread of novel Coronavirus is halted, it will possible to restart the production of metal powder, at least in parts. Players will need to modify their plans and strategies according to how the situation changes in foreseeable future. 5 Metal Powder Manufacturers Reel from Uncertain Future Prominent stakeholders in the global metal powder market include, but are not limited to, Deva Metal Powders Pvt. Ltd., MMP Industries Ltd., The Arasan Aluminium Industries (P) Ltd., Sarda Industrial Enterprises, BASF SE, GGP Metalpowder AG, Laiwu Iron & Steel Group Powder Metallurgy Co., Ltd., Alcoa Corporation, JFE Holdings, Inc., Rio Tinto, GKN Plc., Sandwik AB, Hgans AB, Deva Metal Powders Pvt. Ltd., and MMP Industries Ltd. (MMPIL). The growth of metal powder market had been strong in North America, currently the new epicentre of COVID-19 pandemic. There is high demand for metal powder in healthcare, electrical and automobile sector in the region. As President Trump aims to restart the economy by mid-May, the situation may improve for metal powder manufacturers. On the other hand, Asia Pacific has been lucrative metal powder market in view of rapidly evolving automotive industry and fast-paced urbanization. Even though China has eased its restrictions, India still continues to observe stringent lockdown imposed till May 3rd, 2020. However, as the pandemic begins to subside in the first half of 2021, the production of metal powders in the region will escalate as well. Factors such as cheap labour availability and tax benefits will support the growth of regional metal powders market after the pandemic ends. The electronic, electrical and automotive industries in particular are major growth propeller of metal powders market in Asia Pacific. Enormous populations of China and India have the capacity to revive the automotive industry and thereby metal powders sector in foreseeable future. 6 Transport and Logistics will Proliferate Demand for Metal Powders after COVID-19 Ends Transport and logistics industry have exhibited high adoption rates of metal powders in the past. As the lockdown is lifted across the world, the logistics industry will resume operations. This will in turn increase the usage of automobile vehicles. Hence, the demand for metal powders in transport and logistics will rise again after the travel restrictions are lifted. Highly favoured attributes such as recyclability, less waste, high volume capacity, cost efficiency and reduced production time will drive the consumption of metal powders after COVID-19 pandemic takes a back seat. These attributes or properties will generate remunerative opportunities in foreseeable future. In terms of predominant usage, ferrous metal powder remains popular among the manufacturers across the globe. 7 Variegated Segments will Inflate Sales of Metal Powders after the Pandemic Automotive industry is not the only end-use area of metal powders. Apart from transport and logistics, metal powders also find prominent usage in variegated industries such as medical and electronics industry. Metal powders are used for manufacturing metal parts such as osteoporosis pen ratchet, intestinal staple gear system, kidney dialysis spring. Moreover, bridges, partials, and copings are fabricated from metal powders in the dental field. Even though other elective procedures are being postponed as COVID-19 patients take up more beds in the hospitals, these will gradually rise as the pandemic recedes. Moreover, the healthcare expenditure in both developing and developed countries is expected to rise further which would bode well for metal powder market in future. On the other hand, burgeoning electronics industry will fuel the adoption of metal powders even after the pandemic. For instance, India will allow ecommerce giants such as Amazon to deliver electronic devices such as laptops and mobiles. This move will boost the demand for metal powders in one of the biggest markets of the world. In terms of dollar value, electronics industry is the prominent end-use area of metal powders. However, in terms of market share, automotive industry will remain major end-use area of metal powder throughout this decade. Other applications of metal powder include aerospace, chemical, and building. However, both building and chemical industries have weekend by the COVID-19 pandemic. Moreover, aerospace is undeniably the worst affected sector by the Coronavirus outbreak. Hence, use of metal powder in these sectors will remain limited through the course of 2020. 8 Metal Powder Manufacturers Continue to Reinvent Themselves for Competitive Ascendancy Technological innovations have been the norm of metal powder sector on account of its recyclability attributes. Globally leading producers continue to reinvent their products, processes and materials for gaining competitive edge in the metal powder market. Moreover, diversifying the end-user applications is their key strategic tenet as well. The versatility of metal powder is the chief feature ascribed for these growth-oriented strategies. Therefore, even in the midst of pandemic, these strategies would come in handy to develop new processes, applications and products for indubitable competitive advantage. Even though the automotive industry is not functioning as players may want it to be, metal powder producers can leverage the growing demand in healthcare segment instead. Apart from that, key stakeholders are focusing their efforts on revenue generation, manufacturing processes, industrial penetration, distribution channels, and adoption of proprietary technologies. Niche players in the global automotive metal powder market must keep track of legal policies and latest developments put forth by the government. The survival of global automotive industry will rely on continued research and development activities to explore new end-use areas of metal powder. 9 Demand for Metal Powders in Additive Manufacturing will Soar Through 2026 Additive manufacturing process such as rapid prototyping and 3D printing are increasing adopting the usage of metal powder, particularly the gas atomized variant. Applications such as rapid tooling areas, medical and aerospace industries deploy additive manufacturing processes thereby invigorating the demand for metal powder. A number of players across the world are using 3D printing technology to manufacture respirators, and other personal protective equipment in order to fulfil the unprecedented demand amid COVID-19 pandemic. Hence, there exists a huge potential in this area for top players in the global metal powder market. These end-use areas will further spike the demand for metal powder through 2026. Good flow properties, high packing density, and spherical morphology are highly preferred attributes of metal powder driving its usage in additive manufacturing procedures. For instance, good flow-ability is ensured by characteristic particle size distribution of atomized metal powder. Moreover, clean microstructures and low oxygen powders yield uniform build rates. Different additive manufacturing requires different particle size distribution thereby propelling the adoption of variegated metal powders. As of now, COVIDD-19 pandemic continue to hamper the growth of automotive industry in view of closed foundries and cancelled events. International trade fairs are being postponed across the globe in the wake of prevalent outbreak. On that premise, the future of metal powder sector looks promising once COVID-19 subsides. 10 Author Bio Nikhil Kaitwade Nikhil Kaitwade works as Research Manager at Future Market Insights. With over 8 years of experience in market research and consulting industry, Nikhil has worked on more than 250 research assignments pertaining to chemicals, materials, and energy sector. He has worked directly with about 35 reputed companies as lead consultant for plant expansion, product positioning, capacity factor analysis, new market/segment exploration, export market opportunity evaluation and sourcing strategies. The insights presented in this article are based on Future Market Insights COVID-19 Impact on Automotive Industry.