20220113-IMF-Cars_in_Europe_Supply_Chains_and_Spillovers_during_COVID-19_Times_42页_2mb

Cars in Europe: Supply Chains and Spillovers during COVID-19 Times (IMF Working Paper WP/22/6)

I. Introduction and Stylized Facts
The European auto sector is macro-critical, accounting for a significant portion of manufacturing, employment, and exports in many countries. However, its market share has declined since the early 2000s amid global production shifts. The COVID-19 pandemic severely impacted this sector in 2020, with initial lockdowns reducing car production by over 20 million units compared to 2019. While production rebounded in 2020, supply chain disruptions in 2021, particularly semiconductor shortages, constrained output. Unlike the 2009 crisis, the 2020 sales decline was deeper and faster, reflecting stricter lockdown measures and dealership closures. The auto sector's adaptability is evident, but ongoing megatrends like electrification and labor shortages will shape its future.

II. Supply Chains and Analytical Framework
The European auto sector features complex, fragmented supply chains, with around 80% of intermediate inputs sourced within Europe. It is relatively downstream to final demand but relies heavily on foreign markets, notably the US and China. Using a multi-country, multi-sector general equilibrium model, the study analyzes labor supply shock transmission via supply and demand channels. Key parameters include labor elasticity (assumed at 2) and input substitutability elasticities.

III. Key Findings
Labor supply shocks during the pandemic had significant adverse effects on the European auto sector. In a global lockdown scenario, the auto sector’s real value-added contracted by approximately 30% (compared to imports). About two-thirds of this impact stemmed directly from the sector itself, while domestic spillovers accounted for around 20%, and foreign shocks for about 10%. Services sector disruptions had the most severe domestic spillover effects due to their size. European supply chains are highly integrated, so spillovers from other European countries were dominant, but external shocks from Asia-Pacific and North America also mattered.

IV. Policy Implications
Strengthening resilience in auto supply chains is crucial. Firms can mitigate risks by diversifying supplier relationships, standardizing inputs, and holding higher inventory. Governments can support by sharing upstream information to prevent bottlenecks. Further research could explore other types of shocks and incorporate dynamics related to investments and input complementarities.

Conclusions
COVID-19 underscored the fragility of global supply chains. Future auto supply chain resilience relies on diversification and better coordination. As climate policies gain traction, electrification will also reshape the sector.

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