IHS Markit reports on the impact of COVID-19 on automotive R&D activities
As part of its continuing research and analysis on the impact of COVID-19 on the global auto industry, the Automotive Supply Chain and Technology team at IHS Markit recently completed a survey among automakers and suppliers across all regions to assess the impact of the virus on research and development.
The survey finds that the speed and scale of COVID-19 social and economic fallout is quickly materializing in concerns about the future recovery of vehicle demand with the associated consequences on OEMs’ and suppliers’ investment decisions. With cashflow drying up due to sales activity grinding to a halt in core markets and little prospect for an imminent “return to normal,” automakers and suppliers are looking to shore up their finances by preserving cash and other non-critical expenses.
This context combined with potential adjustments to the regulatory framework on key automotive aspects in the areas of e-mobility, autonomy, and connected car, for example, could potentially have far-reaching implications on the technology deployment as well as short- and medium-term research investment priorities.
According to the survey, OEMs and suppliers clearly expect significant disruption to both R&D as well as sales and production. Most respondents have indicated that the automotive R&D impact should be concentrated in the coming year, when a major contraction of development and advanced research budgets is expected.
It’s reported that 28% of respondents think COVID-19 will impact revenues beyond the next 12 months, while only 20% indicated that their automotive R&D activities will be impacted beyond the next 12 months. Respondents in Asia (China in particular) indicated a greater concern on long term R&D impacts (over 3 years) compared to Europe and North America.
As the inevitable impact of revenue loss from the virus works itself through the companies’ budgeting processes, some 92% of respondents indicated that R&D budgets are likely to consequently shrink, which may result in a series of cost containment measures being deployed.
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