July 24, 2020

“In times of crisis, many companies pull back on innovation and R&D.  These are the times that separate the winners from the rest.  Leaders with a long-term view are laser-focused on their mission, and they tend to be rewarded with opportunities.”
Kishore Ahuja, Sr. VP at North American Lighting, a Koito Group Company

“During uncertain times, organizations tend to reprioritize and focus on their core competencies. While this is a viable strategy, organizations cannot write off innovation as a necessity in only good times — innovation remains a critical component for companies to achieve their long-term strategic initiatives. Organizations that invest in innovation during a downturn discover opportunities fostered through creativity that leads to sustained long-term growth. At Plug and Play, we strongly believe there are many ways to innovate, not just through evaluating new business models and exploring new markets. A great example is through process innovation — we hosted a series of webinars focusing on startups in the manufacturing space to decrease cost and increase margins.”
Sobhan Khani, VP at Plug and Play

 Lost Times
We are exhausted, scared, yet hopeful.  This virus has taken our most valuable resource from us, time.  Time with our loved ones, time doing things we love, and time at work.  As the world debates cautiously reopening, we struggle with the discontinuity this pandemic has left us with.  Real estate agents need new virtual ways to tour houses, restaurants need to develop logistics for curb side delivery, even the New York Stock Exchange is looking for innovative ways to keep the trading floor open.

Automotive Stress Test
Main street has not been immune, with the automotive industry particularly hard-hit by the COVID-19 pandemic.  Major automotive OEMs saw April’s sales plummet between 20-50% YoY [1].  Toyota, one of the highest volume automakers to report sales, saw U.S. results plunge to 84,694 units from 183,866 units.    Major automotive manufacturers have announced factory shutdowns to keep workers safe, announcing furloughs and layoffs of over 30,000 workers in the US [2].  This created a domino effect throughout the industry as automotive suppliers and dealerships made similar announcements [3] [4].   New players in the industry were not spared, as rideshare and e-scooter companies continued the chain of bad news [5] [6] [7].

These headlines have left organizations across the automotive sector with questions on what to do next, and how to prepare for the future. Disruption of this magnitude has introduced an unprecedented stress test across business, engineering, and production.

Crisis Presents Opportunity
But there is hope.  Many companies are looking to history for guidance.  During World War II American GI’s faced a shortage of spare parts for their trucks and jeeps, and they found jury-rigged fixes with materials on hand to keep them running [8]. Today’s GIs are startups looking at ways they can fill the void brought on by this pandemic.  Innovation is their tool to discover new solutions.

Automotive companies know this.  During the recession of 2008, credit was in a crunch.  Dealers facing declining sales and reduced margins quickly adapted their strategies, focusing on cross-sales and up-sells to survive.  They amplified underutilized revenue streams such as service business, grid pricing, and multipoint inspections that included servicing tires, detailing, and minor bodywork and headlight restoration [9].  The pandemic of 2020 has brought on deeper challenges than The Great Recession. To combat low sales due to decreased consumer confidence and the inability to visit dealerships, automakers have designed an innovative financial incentive.  Some OEMs are offering 84-month car loans at 0% interest with their first payment not due for 120 days, along with contactless home delivery [10] [11].

As consumer values shift during a crisis, new opportunities can arise.  Nuro, a driverless delivery startup, has been helping with COIVD-19 relief by making contact free deliveries at two make-shift facilities in California.  Boston-based Optimus Ride, an autonomous shuttle startup, is now helping deliver meals and packages to residents of Paradise Valley Estates, a retirement community for people 55-plus also in California. [12]

Opportunity also presented itself at the beginning of this century. The economic recession of 2001 caused vehicle sales to decline – the cost of owning a vehicle, especially in large cities, was prohibitive for many people.  Zipcar, a car-sharing startup, provided an innovative solution.  The solution filled a void around the world, access to a vehicle when you need it [13].

Looking Forward
While the situation in the automotive industry looks glum and the pandemic has brought numerous problems, there is a glimmering hope for the future.  We can be sure that new opportunities are rising out of the crisis, waiting to be discovered.  Innovation is important now more than ever.  History has proven that companies that strategically continue R&D spending and internal development, collaborate with nimble startups, and support investing activities reap rewards in the long run.

Authored by the Innovation Team of North American Lighting, A Koito Group Company
Amit Mehta and Dan Davies

[1] https://www.caranddriver.com/news/a32343442/auto-sales-results-april-2020-down/

[2] https://www.caranddriver.com/news/a32083482/automakers-layoffs-coronavirus/

[3] https://charlestonbusiness.com/news/automotive/77812/

[4] https://www.carscoops.com/2020/03/u-s-car-dealerships-could-lay-off-360000-or-nearly-one-third-of-all-workers-by-may/

[5] https://techcrunch.com/2020/04/29/lyft-is-laying-off-982-employees-furloughing-a-further-288-due-to-covid-19-pandemic/

[6] https://dot.la/bird-layoffs-meeting-story-2645612465.html

[7] https://www.theverge.com/2020/4/29/21242041/lime-layoff-80-100-employees

[8] https://www.harvardbusiness.org/innovation-in-a-time-of-crisis/

[9] https://www.autonews.com/article/20180903/RETAIL07/180909981/the-great-recession-turned-out-to-be-an-innovation-lab-for-the-industry

[10] https://www.ksat.com/news/national/2020/04/17/automakers-are-offering-extreme-deals-buyers-should-proceed-with-caution/

[11] https://www.cnet.com/roadshow/news/coronavirus-car-buying-deals-automaker-home-delivery-options/

[12] https://www.therobotreport.com/nuro-r2-driverless-vehicles-deliveries-covid-19/

[13] https://www.entrepreneur.com/article/225399

Contact:  Kayla Boyll, Corporate Branding Specialist:  217-465-6600 Ext. 7429


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