Global auto index: Tough road ahead for car makers

The global automotive industry faces perhaps its greatest challenge ever in the weeks and months ahead, trying to reopen amid a global pandemic. 

 During the recent height of the pandemic, it looked like things couldn’t get much worse.

The easing of COVID-19 cases provided an opening for many to restart, but the tough times are far from over.  

The long-term question is whether they can stay open

To do so, workers must stay healthy. That won’t be easy in the close quarters car workers typically operate. Will productivity suffer if distancing requirements are enforced? And if so, will owners relax those rules? 

There is still the strong potential for COVID-19 cases to reemerge. 

It doesn’t necessarily matter where an outbreak occurs. Car makers depend on auto parts from thousands of suppliers around the world. This is a global supply chain as strong as its weakest link. 

Then there’s demand. Will people keep buying cars like they used to?

Finished car lot at GM plant, Roanoke, IN

Finished car lot at GM plant, Roanoke, IN

All these issues have made the automotive sector one to watch. It has been shaped by the coronavirus and the cascade of events stemming from the pandemic. 

But the auto industry will also help to shape the post-pandemic world. Car plants are major employers around the world, making them vital to the global economy. 

With this in mind, Ursa has begun monitoring car plants around the world with satellite radar imagery to gauge where production may be rebounding -- or still declining -- as a gauge on overall economic robustness. 

Using the example of Volkswagen’s plant in Tianjin, China, we discussed earlier how we developed an activity index, examining the lots adjacent to the factory where finished vehicles are stored.  

The same technique was applied across 43 plants in the US, China and Europe from September 2018 to present. 

The result of this scaling operation is Figure 1 -- Ursa’s global auto manufacturing index.

The index reveals some seasonality, which likely mirrors the seasonality in car sales. But the main takeaway is the pronounced drop since mid-April as lockdowns reduced production levels. 

As of mid-May, the activity remains depressed, with the lowest readings during this period.

Figure 1

Figure 1

The global index of 43 car plants include the following countries: US (9), Spain (2), France (4), UK (6), Germany (7), Italy (3), China (10), South Korea (1) and Japan (1). 

Companies include BMW, Fiat, Ford, GM, Hyundai, Nissan, Tesla, Toyota and Volkswagen, among others.

View our auto manufacturing dashboard for a closer look at each facility. See which facilities/companies are producing below their average levels. 

The main driver behind the global trend has been the US, which saw its manufacturing index plummet since mid-April. 

China and Spain, which was particularly hard-hit by the coronavirus, also display downward sloping trend lines in 2020 with respect to their auto manufacturing indices (Figure 2).

 

Figure 2

Figure 2

At what point will these trends reverse? Judging from the headlines, the inflection point could be soon.

For example, the US auto industry mostly reopened at the start of this week. Based on what happened next, it seems likely the process won’t be smooth.

Ford Motor closed an assembly plant in Chicago twice on Tuesday, March 19, a day after reopening, after two workers on different shifts tested positive for COVID-19. 

The Chicago plant was closed again on Wednesday due to a parts shortage. Ford closed its Dearborn, Michigan plant the same day due to a positive COVID-19 test by a worker.

This doesn’t mean there haven’t been any signs of improvement.

Take the VW plant in Tianjin, which has seen a ramp-up in activity since April (Figure 3).

Figure 3

Figure 3

How do we calculate the index?

Our team analyzed synthetic aperture radar (SAR) imagery to determine the presence of cars at manufacturing facilities around the world.

Finished cars are stored in adjacent lots. The area outlined in red below is such a lot at VW’s plant in Tianjin. 

The presence of more “bright” or “white” areas means there is greater SAR energy, which means more cars in the parking lot (Figure 4).

Figure 4

Figure 4

Ursa’s radar imagery experts quantify the SAR energy in the images to develop an index. 

Results above 1 are greater than the average SAR energy over the period. Results below 1 are less than the average SAR energy. 

Every satellite observation has a unique score that is plotted on the graphs shown above.

You can view this blog and other material on our COVID-19 Dashboard, which is open to the public. 

Bookmark this Dashboard. Check back for alerts of when and where these trends reverse.

Ursa is continuously monitoring vital locations around the world using satellite imagery to provide a deeper understanding of the impacts of COVID-19. 

If there’s somewhere you’d like us to take a look, please let us know

Geoffrey Craig