Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on the day's biggest business stories

Subscribe to Axios Closer for insights into the day’s business news and trends and why they matter

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Stay on top of the latest market trends

Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sports news worthy of your time

Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tech news worthy of your time

Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Get the inside stories

Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Axios on your phone

Get breaking news and scoops on the go with the Axios app.

Download for free.

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Denver news?

Get a daily digest of the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Des Moines news?

Get a daily digest of the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Twin Cities news?

Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Tampa Bay news?

Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Charlotte news?

Get a daily digest of the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sign up for Axios NW Arkansas

Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Aïda Amer/Axios

The coronavirus pandemic has left global automakers and suppliers burdened with debt and in a much weaker position to navigate a historic transformation toward electric, self-driving cars.

Why it matters: The industry was already entering what AlixPartners called a multiyear "profit desert" because of the massive upfront investments they are making in future technologies. Now carmakers will likely be forced to delay or cut spending on many of those innovations as they crawl out of a giant COVID-19 hole.

Details: In just a matter of weeks, automakers and suppliers took on an astonishing $72 billion in new debt to survive the economic jolt from the pandemic, per AlixPartners.

  • Factory production stopped for two months, but automakers still had to pay suppliers for parts already in the pipeline.
  • Meanwhile, revenues plummeted as consumers hunkered down under government stay-at-home orders.
  • The resulting cash squeeze pushed most companies' credit ratings lower, with Ford, Fiat Chrysler and Renault sliding into junk bond territory.
  • S&P now has a negative outlook on almost every major auto company.

Recovery will be slow. Global sales will fall 22% this year and won't likely return to 2017's peak of 94 million vehicles until after 2025, according to AlixPartners' annual global forecast.

  • The hit from COVID-19 "is as if a market the size of all of Europe had vanished for the year,” Stefano Aversa, chairman of the firm's Europe, Middle East and Africa practice, told journalists.
  • China is already bouncing back, and the U.S. is showing some resilience, but the European market will see the slowest recovery, per AlixPartners.
  • While North American factories have resumed operation, production is still about half the usual rate, according to Barclays, and dealers are running short of vehicles in many parts of the U.S.

The good news is that demand is bouncing back, especially for trucks and SUVs.

What to watch: With financial pressures mounting, carmakers will have to slash costs to lower their break-even point and make tough calls on which programs to keep funding.

  • "You still have to invest in the future," Mark Wakefield, global co-leader of AlixPartners’ automotive and industrial practice, told the Detroit News. But, "the cash available for that is just less."
  • So far, companies seem to be protecting their electric vehicle projects — likely because government regulations require them to do so.
  • Still, AlixPartners expects EV spending between now and 2024 to be cut or delayed from $234 billion to about $200 billion.
  • Autonomous vehicles will likely bear the biggest cuts. Prior to COVID-19, the industry was expected to spend about $79 billion on AVs between 2020 and 2025. Now, about $25 billion of that will be delayed or cut, they predict

Go deeper: Coronavirus shatters electric vehicles' crystal ball

Go deeper

GM and Honda look to develop more vehicles together

GM and Honda collaborated on the design of the Cruise Origin, a robotaxi prototype in San Francisco. Photo: Cruise

In a sign of the times, GM and Honda said this week they're looking to develop more vehicles together, sharing platforms and propulsion systems across their product lineups in North America.

Why it matters: Automakers have already been forming strategic alliances to collaborate on expensive technologies like connected, self-driving electric cars. But the pandemic has taken a heavy toll on the industry, heightening the need for cost savings on core products, too.

The separate and unequal paths in business

Illustration: Aïda Amer/Axios

When a bank turned down George Johnson for a business loan, he got creative. He returned and told the bank he needed $250 to take his wife on a vacation — and was approved. Then he invested the cash in his business, which became the first Black enterprise to trade on the American Stock Exchange.

Why it matters: The highways to success in the U.S. market economy — in entrepreneurship, corporate leadership and wealth creation — are often punctuated with roadblocks and winding detours for people of color.