Impact of COVID-19 on 🚘 automotive industry globally

INTRODUCTION

The COVID-19 outbreak has created several challenges for the automotive sector. Governments all over the world are preparing for a huge spread of the virus. South Korea, Italy and Japan are the most affected by the virus in relation to economies. Many automotive related companies state that Coronavirus will have a huge impact on their 2020 revenues. Many of this companies do not have enough staff to run production line fully.

More than 80 percent of the world’s auto supply chain is connected to China. In January 2020 China’s car sales declined by 18 percent. The China Car Association considers that the coming month’s sales could decline by 40 percent or more compared to the same period of 2019. Production shortage result’s will impact global supply chain management for automaker’s.

China, after hitting a record low cases in march, has started reopening its factories. Automotive companies like Renault and PSA group announced they will be resuming production in mid to late April. however, in Europe, where COVID-19 is spreading quickly. This particularly applies to Italy, where the government implemented a nationwide lockdown. Automotive company’s like Fiat Chrysler, for example, has decided to shut down its plant’s.

The German automotive manufactures, which depends on Chinese supplies, has also comes under threat. This week, production at the Nissan car factory in the UK, has been suspended, and others will likely follow the same.

Hubei province, is one of the five major automotive manufacturing center in China, accounting for a huge % of China’s vehicle production. It is also known as hub for automotive parts production for domestic and foreign automakers. Plant’s have already closed global automotive supply chains. And with stocks emptying quickly, global shortage of auto parts will affect production for 2020.

China is known to be main exporting country for automobile parts. Although automotive components exported from China are, rubber pedals, car door springs, fabrics used in airbags and wiring harness. An huge number of automakers operating in or near Hubei— includes makers like Nissan, General Motors, Volkswagen, Kia, Peugeot, Honda, and Chinese domestics such as Dongfeng were forced to keep production on hold.

Since automotive components are of a several variety and carmaker certification takes a long time, it is impossible to shift orders in the short term. Thus, China-based makers’ shortage of supply is likely to impact other car factories in the next several weeks. Although some automotive plants in China are reopening as the worldwide expansion of the covid-19 continues, but sales in China for couple months were not good.

Automotive suppliers are warning car companies they could run out of certain parts used in North American factories in coming weeks, with special concern over potential shortages of electronic components. As a result of closing factories of electrical parts in china, Hyundai which with its affiliate Kia ranks as the world’s fifth-largest auto manufacturer  has run out of the wiring harnesses a part that connects vehicles’ complex electronics.

Here is a list of automotive companies which face the impacts on their supply chain:

·       Fiat Chrysler Automobiles:
Fiat Chrysler has decided to hold the operations at its factory in Serbia, due to shortage of parts from China because of the covid-19.

·       MTA S.p.A. Advanced Automobile Solutions:
The Italian manufacturer MTA, which makes electrical parts for cars, has been forced to close its factory in Codogno after the Covid-19 outbreak in northern Italy. It said the closure would have a huge impact on production at Fiat Chrysler’s plants in the country before spreading it to the other carmakers in Europe.

·       Dongfeng Motor Corporation:
Dongfeng Motor, China’s second-largest carmaker based in Wuhan, has posted lower profits as a result of the extended production hold arises from the deadly coronavirus outbreak.

·       Renault Group:
Renault has increased the suspension of its industrial activities in China to April because of the effects of the coronavirus. Renault’s factory in Wuhan, which operates with Dongfeng in a joint venture, will be closed.

·       PSA Group:
PSA’s joint venture with Dongfeng Motor, called DPCA, has two assembly plants in China, in Wuhan and Chengdu. The plants produce Peugeot and Citroen models for the Chinese and other Asian markets. It also makes engines and transmissions at a factory in Xiangyang, some of which it exports to Europe. PSA has extended the suspension of its industrial activities in China into March because of the effects of the coronavirus outbreak.

·       Nissan Motor Co., Ltd:
Nissan Motor Co said it would keep its plants in Xianyang, Hubei Province, and Zhengzhou, closed after Feb. 24. It did not give a new date for reopening.

·       Honda Motor Co., Inc:
Honda Motor Co will temporarily hold production in Japan due to difficulty in sourcing parts from China. The setbacks, which will last for a few days beginning early March, will see as reduction in output by a few hundred vehicles at it’s two plants. Japan’s third-largest automaker has seen its profit declined by more than half in the past couple years, led by a series of quality-related issues.

·       Toyota Motors:
Toyota Motor Corp. said that operations at its plants in Japan may be affected by supply chain issues linked to the coronavirus outbreak in the coming weeks.

·       Hyundai Motors:
Hyundai Motor Company has shut down one of its car factories in South Korea after it was revealed an employee was diagnosed with the virus. The company has started disinfection procedures in areas where the employee worked and quarantined five co-workers who made close contact with the infected employee.

·       Mahindra and Mahindra:
M&M has reported a 43.3 percent decline in total sales at 25,929 units in February.

·       MG Motor India:
MG Motor India too reported lower retail sales of 1,376 units in February, hit by component supply constraints from China and other locations.

·       TATA Motors:
TATA Motors said that vehicle production is affected due to the Coronavirus outbreak in China. Tata motors sold 38,002 in February 2020 and reported a declined 33.6 percentage for the months compare to pervious year.

·       Tesla, Inc:
Tesla has reported 25% declined at the end of February due to coronavirus on the market. There could be further pain ahead of China’s struggling automotive industry and Tesla, which had to shut its Shanghai Giga factory in early February due to the virus outbreak.

·       Mitsubishi Motors Corp:
Mitsubishi Motors has postponed the restart of its factory with Guangzhou Automobile Group in Hunan province until 27 of February due to the coronavirus outbreak.

·       KIA Motors:
Kia, which manufactures several vehicles on similar platforms as Hyundai vehicles, has decided to cut production at its plants in Korea while suspending work in China.

·       General Motors Corporation:
General Motors has a big presence in China through several joint ventures with local companies. A GM spokesperson told that it has restarted production at some plants in China on February 15, but its plants in Hubei province, is the epicentre of the coronavirus, will be kept closed until at least March 10.

·       BMW AG:
Around 150 employees of BMW in Munich have been ordered to ‘self-quarantine’ after a worker in the carmaker’s research and development centre tested positive for the Covid-19 .

·       Bosch:
Also, the top manufacturers of automotive ICs have been hit by coronavirus as its chief executive has said that coronavirus has impacted its global supply chain, which is heavily dependent on China. 

CONCLUSION

The global automotive industry has definitely been affected by this virus outbreak, from the dealership, right up to supporting ancillaries. Various industry bodies have also reached out to the Government’s of their country and the Government is helping them with loans and other methods to help them pass this difficult situation. The mass shutting of factories has put a strain on the workforce, which requires financial aid to support their families during this difficult scenario.

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