UK Automotive Sector and The Coronavirus Outbreak

The UK Automotive sector which had already been reeling from the slowdown of the overall economy during December and January, a phase led by the uncertainty around Brexit and poor geopolitical situations at the time, which had significantly hampered the consumers’ confidence, is now hit by the outbreak of Coronavirus and its spread to nations all across the globe.

Since February, the poor conditions for the auto sector started turning grimmer, as the news of the increase in the number of cases due to the Covid-19 outbreak started peaking up, which not only had led to the supply chain constraint but to a further dampening of the demand of automotive products and their parts. Going by the report from Society of Motor Manufacturers and Traders (SMMT) of the United Kingdom, which is an organisation that keeps track of automotive registrations and production in the United Kingdom, it was suggested that all car brands except Abarth and Alfa Romeo displayed a decline in the number of car registrations for the month of February 2020, as compared to the same period In 2019. In terms of total car registrations for the month of February 2020, it was reported that there was a decline of approximately 2.9 per cent year on year, in comparison with the number of car registrations for the month of February 2019. For the year to date (29^th February 2020), the total number of car registrations declined by 5.8 per cent as compared to the same period in 2019. Registrations of private vehicles have seen the biggest decline out of all categories, which indicates that individual customers are not buying as many cars as they were doing in the previous years, which is a sign of upcoming troubles for the UK Auto sector.

In terms of Car Manufacturing, SMMT’s data suggests that home car manufacturing for the month of February had gone down by around 23.9 per cent year on year as compared to February 2019, while there was a marginal increase in the number of cars manufactured for the purpose of export. This is another concerning statistic for the industry in the United Kingdom, as a major reason that these automakers manufacture cars in the UK is the lower supply chain costs that they incur when selling to the UK citizens. This means that if they are not able to manufacture and sell within the United Kingdom, their plants and factories could shut down, which could be a major disappointment for the sector.

UK carmakers suspend operations in the country

It was reported that three of the world’s biggest car brands, BMW, Honda and Toyota have either suspended or were planning to suspend their car production in the United Kingdom. The major reasons behind this have been suggested to be the sharp decline in sales, in both car and car parts, primarily because of the Covid-19 Pandemic.

The other related reason behind this has been reported to be the way these companies conduct their businesses. The modern car production business requires car parts to be delivered to any location at any possible time, and the coronavirus outbreak has shut down the supply chains of these companies, which are not receiving parts on time, rendering the production facilities and assembly lines to be useless. This is causing a major decline in supply of cars as well, which is not able to meet demand if any exists at the moment. And hence, it can be said that even once the pandemic is over, the ability of these companies to maintain supplies for longer period of times will be questionable. This is the reason that most of the brands have decided to shut or suspend operations in the country, to counter against any potential losses in the future.

There has been a sense of disappointment prevailing in the automotive sector in the UK, as they have failed to perform both operationally as well as financially over the past couple of years, especially since the Brexit vote and the uncertainty around the whole scenario. These have also been testing times for such companies whose stocks are trading as a part of the London Stock Exchange Market. The following is a closer look into the recent stock price performances of three such Automotive sector companies, which are likely to continue to witnessing volatility in the market.

Share Price Performance

On 19^th March 2020, at around 12:30 P.M (Greenwich Mean Time), at the time of writing this report, the share of AA Plc has been reported to be trading at a value of GBX 19.48 per share on the London Stock Exchange market, a decline in the price of approximately 0.46 per cent or GBX 0.09 per share, in comparison with the price of the share at the time of closing on the previous day, which was reported to be at GBX 19.57 per share. While writing this report, the market capitalisation (M-Cap) of the company’s share has been reported to stand at a value of GBP 120.77 million in reference to the current market price of the company’s share.

The beta of the share has been reported at a value of 2.13, representing the fact that the movement of the share price of the company, is more volatile, as opposed to the movement in the comparative benchmark index.

MMH Share Price Performance

On 19^th March 2020, at around 12:35 P.M (Greenwich Mean Time), at the time of writing this report, the share of Marshall Motor Holdings Plc has been reported to be trading at a value of GBX 100.00 per share on the London Stock Exchange market, an increase in the price of approximately 1.52 per cent or GBX 1.500 per share, in comparison with the price of the share at the time of closing on the previous day, which was reported to be at GBX 98.50 per share. While writing this report, the market capitalisation (M-Cap) of the company’s share has been reported to stand at a value of GBP 77.06 million in reference to the current market price of the company’s share.

The beta of the share has been reported at a value of 0.77, representing the fact that the movement of the share price of the company, is less volatile, as opposed to the movement in the comparative benchmark index.

TRT Share Price Performance

On 19^th March 2020, at around 12:40 P.M (Greenwich Mean Time), at the time of writing this report, the share of Transense Technologies Plc has been reported to be trading at a value of GBX 50.50 per share on the London Stock Exchange market, an increase in the price of approximately 2.54 per cent or GBX 1.25 per share, in comparison with the price of the share on the at the time of closing on the previous day, which was reported to be at GBX 49.25 per share. While writing this report, the market capitalisation (M-Cap) of the company’s share has been reported to stand at a value of GBP 8.03 million in reference to the current market price of the company’s share.

The beta of the share has been reported at a value of 1.29, representing the fact that the movement of the share price of the company, is more volatile, as opposed to the movement in the comparative benchmark index.

Some positive from the Auto sector

In the midst of such a huge crisis and all the negative news, there has been some positive news for the Auto sector as well. Vauxhall, which is one of the companies that would be temporarily going for shut down in the United Kingdom, is planning to utilise its facilities to develop parts for ventilators, which could provide a huge boost to the overall healthcare system in the United Kingdom. The company, along with the aeroplane manufacturing giant Airbus, will use the 3-D printing technology to achieve this ambitious task and will put together a host of medical devices, and parts of ventilator systems, that could prove to be crucial to the overall containment of the Covid-19 Pandemic in the United Kingdom. This activity is being conducted under the supervision of some of the biggest engineering, automotive as well as airline companies of the UK, after a call from Boris Johnson to the corporate sector, to help the government out during this time of crisis, as has been previously done during the world wars. It is also being said that these companies would not charge anything from the government to provide expertise and staff in conducting this activity. Other big names that are likely to be involved in this or other such activities include the likes of Virgin Hyperloop, Jaguar Land Rover as well as Rolls Royce.

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