Coronavirus: What To Expect From The Automotive Industry?
Coronavirus!! It has fear attached to its name, right? That is because it spread like wildfire after its outbreak in Wuhan, China. Now its neighbor countries like Iran and Pakistan are also affected. Not only those, but even Europe faces cases of the Covid-19, the disease caused by the said virus. More than 85,000 cases have been reported globally.
The COVID-19 pandemic quickly and severely affected the integrated world-wide automotive industry. The symptoms include loss of exports of Chinese components, major production disruptions throughout Europe and shutdown of assembly factories in the United States. This puts great pressure on a sector that already faces a downward trend in global demand and probably leads a stronger concentration and purchase activity.
Though only humans can become ill by coronavirus, everything has fallen victim to it. Be it trade or tourism, the charts are going down. “It has implications not just for China but for the entire world. The world depends on Chinese growth”, says Mauro Guillen, Professor of Wharton Management in University of Pennsylvania. This mirrors the impact it is having on the automotive industry.
Coronavirus strikes the Auto Industry
You know which city is called the “Motor City”? The one which is the origin of the deadly coronavirus. Isn’t it shocking? This fact alone gives us a crystal-clear idea of how drastically the auto industry has been disturbed ever since coronavirus struck Wuhan. It accommodates plants of various popular auto manufacturers including Volkswagen, General motors, Honda, Nissan, Toyota, Volvo, and Dongfeng Renault. As expected, these plants halted their functions amidst the deadly outbreak. Automotive sales went down by 92% in the first half of February.
European auto industry was also shaken when coronavirus cases were found there. The boss of Jaguar Land Rover warned of shortfalls from March if the supply chain continues to be jolted by the widespread virus. Chief executive Ralf Speth earlier revealed that the company resorted to bringing parts in suitcases to UK as virus concerns loom over the industry.
Data compiled by Yahoo Finance shows that U.S. auto giant General Motors airlifted supplies for North America truck production due to parts shortage. Italian American automaker Fiat Chrysler has been looking for alternative suppliers. The auto industry in Japan has been intensely hampered as well where auto shows, and car launches have been cancelled. This has steered the auto sales in Japan downhill.
As for the suspension of auto plants, Nissan and Honda have decided to further extend the production pause in their plants in China. Nissan announces to keep its plants shut indefinitely in Hubei and Henan provinces. Honda’s operations in Wuhan are expected to stay halted till 11th March. Toyota also fears its operations in Japan getting hit by supply- chain issues.
Automakers should watch out
The past couple of months have been fateful for the automakers and the auto industry. With digits falling off the cliff and production being shuttered; the sight is not pleasant. Most of the automakers globally have their Asian investments made in China. Due to that, vehicle sales in China accelerated from 1 million units in 2001 to 24 million units in 2019.
Over the past decades, automakers have become increasingly dependent on China. All was going well until the contagious virus emerged on the scene and China faced curfew situations all around, shocking the global auto industry because of factories being shut and production being ceased. This entire unfortunate series of events has a lesson in it for automakers to learn. They should regulate their supply chain and make sure that there is a balance in their dependence on China as their production house. As it is said, ‘Hope for the best, Prepare for the worst.’
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