Long Covid is about to hit the car industry with increased warranty costs expected in months or years to come, says Renee Stephens, Vice-President of We Predict automotive analysts.
If current and past trends are any indication, the global pandemic has implications to change what automakers and suppliers see in their warranties as they continue to ramp up operations, with the potential for several factors to disrupt results, said the company which has a UK office in Swansea.
“Plant start-up, supplier disruptions and vehicles sitting on lots at dealers and ports have the potential to increase repairs on the existing inventory of new vehicles, as well as those currently being produced,” she says.
“These factors all could negatively affect quality. Conversely, with stay-at-home orders shuttering dealerships for weeks, service and part delays have the potential to temporarily decrease repairs on models already in service.
“While the full impact of these events may take months to hit automakers’ warranty balance sheets, we can use data we have today on tens of millions of models and billions of service records in We Predict’s Deepview to estimate the risk of these factors and the potential impact.”
A number of factors can come together to cause the issues for car makers, said We Predict.
“Let’s start by looking at plant start-up disruption. How do you measure that impact? A company’s ability to manage a full plant start-up mirrors that company’s ability to manage launch. In moving from launch to launch +1 (the second year of launch), we can obtain a proxy for the company’s ability to rise out of launch disruption. That change can be positive (coming out of disruption) or negative (increasing disruption). Both are important.
“We studied 328 automotive launches and major start-ups from 23 brands over the past eight model years (2013-2020), and found that, on average, warranty repairs increase by 388 incidents per 1,000 vehicles (PP1,000). Even the best brand has a warranty increase of 104 PP1,000, and the worst brand experiencing an increase of 784 PP1,000. On balance, launch disruption accounted for 25 percent of the increase in warranty, with some brands faring better (11%) and others worse (44%).
“Based on the study, service per 1,000 rates are projected to increase between 1,198 and 1,346 on late build-out 2020 models and early 2021 production due to plant and supplier disruption caused by COVID-19. This represents an increase of between 240 and 388 service incidents per 1,000 vehicles.”