U.S. Car Manufacturing at Risk?

The automotive industry plays a major role in the United States’ economy, comprising approximately 4% of the country’s economic output each year (Boudette, 2020). So, when U.S. car manufacturers were shut down in March for two months due to the coronavirus pandemic, the financial well-being of the industry, as well as the U.S. economy, was threatened.

Today, automakers are operating at full capacity by allowing several shifts of workers into the factories at a time. In the midst of the country reopening, demand for car buying increased far more than the industry anticipated. Many believe that social distancing standards have caused a surge in car buying, which has been depleting automotive dealers’ lots. Increased demand in car buying is putting pressure on the large automakers to produce more cars and trucks to meet the needs of the dealers. After an all-time low production level of approximately 10,000 vehicles in the U.S. in April, production levels have steadily increased to approximately 540,000 in May, 1.7 million in June, and returned to normal production levels of 2.6 million in July.

Although this sounds promising for a struggling industry after the first coronavirus shutdown, can automakers keep their plants open with the pandemic surging in many areas around the country? Many automakers believe that they are able to safely maintain operations by following CDC guidelines, noting safety measures such as mandatory face coverings, social distancing (even with employees who need to work in closer quarters), and sanitation stations. Despite what these automakers believe, just one case within a plant can bring fear among other workers. At this point in the pandemic, it is very difficult to say whether these manufacturers will remain on the same path to meet the larger-than-expected manufacturing demand. Many have already made the decision to shut down plants in areas where coronavirus cases are spiking. The ultimate question is: how will this affect the American economy in the next few months?

The economy, which is slowly rebounding from the effects of the virus in March, will undoubtedly be impacted if car manufacturing shuts down for the second time. Production forecasts for the remainder of 2020 shows below average levels compared to previous Q3 and Q4 result. Automakers are doing their best under the world’s microscope to keep their work environment safe for their employees in order to continue production, but is it sustainable in the current situation of the country? Only time will tell.

References

Boudette, Neal E. “Automakers Are Making Cars, but Virus Surge Puts That at Risk.” The New York Times, The New York Times, 14 July 2020, www.nytimes.com/2020/07/14/business/economy/automakers-production-shutdown-coronavirus.html.

“United States Car Production1967-2020 Data: 2021-2022 Forecast: Historical.” United States Car Production | 1967-2020 Data | 2021-2022 Forecast | Historical, tradingeconomics.com/united-states/car-production.