The Limited Times

Now you can see non-English news...

Corona virus is likely to hit the automotive industry particularly hard

2020-02-17T07:06:12.206Z


Switching to electric cars, weak sales, diesel crisis: The auto industry is struggling on many fronts. Now there is the corona virus. The consequences for the industry could be painful, at least warn consultants.


Switching to electric cars, weak sales, diesel crisis: The auto industry is struggling on many fronts. Now there is the corona virus. The consequences for the industry could be painful, at least warn consultants.

Frankfurt / Main (dpa) - According to consultants, the corona virus in China could cause serious damage to the global auto industry.

According to a study by the consulting firm BCG, almost two million cars are manufactured at a dozen locations in the particularly affected Hubei province alone. That is about eight percent of China's vehicle production.

For light commercial vehicles, Hubei is the country's most important production site after Guangdong province on the border with Hong Kong. However, plants were shut down not only in Hubei for days, but in a number of provinces. For comparison: The global market leader VW sold a good 10.9 million cars in 2019.

The corona virus has affected many industries, according to the Boston Consulting Group (BCG). "But the auto industry stands out as one that quickly and deeply feels the impact of China's crucial role." The country is the largest sales market for new cars and also an important location for manufacturers and suppliers. "The auto industry will be affected locally and around the world," the consultants write with regard to disrupted supply chains.

In total, there are over 700 foreign and Chinese suppliers in the province with its sealed-off capital, Wuhan. Foreign automakers are also heavily involved in Hubei: A large part of the production of joint ventures with Chinese companies is in the province, according to BCG. Joint ventures of the Chinese manufacturer Dongfeng with Honda, PSA and Renault, for example, have their headquarters in Wuhan.

A slump in production could have global consequences for supply chains, as China is one of the largest exporters of vehicle parts - such as brakes, electronics, chassis and wheels. Each of these categories represents $ 5 to $ 6 billion in exports, BCG said. Over half of these exports go to the United States and the EU. The consequences of disrupted supply chains would "be felt in company headquarters around the world," they predict. Car companies with large China business should prepare their supply chains for turbulence or activities to other countries.

China is particularly important for German manufacturers: The People's Republic is the most important market for Mercedes-Benz, Audi, BMW, Volkswagen and Porsche. At VW, China represents a good 40 percent of deliveries. Global manufacturers are also dependent on the Far East: GM sells more cars in China than in the United States, BCG said.

Most recently, the corona virus had hit the already sluggish auto market in China. In January, manufacturers delivered 1.6 million vehicles to car dealers - a good fifth less than in the same period last year, reported the China Association of Automobile Manufacturers. That was the worst slump since the beginning of 2012. Buyers increasingly avoided car dealerships in the face of the epidemic. The association estimates that the coronavirus (Covid-19) could cut car production by a million vehicles this year. Around 21 million cars were sold in China in 2019.

It has been stuck on the world's largest car market for around a year and a half. The trigger was the customs dispute between the United States and China. Now there was a partial agreement, but the economy in China is weakening.

The lung disease has already hit German car companies. For example, BMW had extended the Chinese New Year holidays at its world's largest location in the megacity Shenyang because of the corona virus. This Monday (February 17), production in the factories should start up again. The temporary standstill has no consequences for global supply flows. "We currently do not expect other plants outside of China to be significantly affected," said BMW CEO Oliver Zipse recently.

At VW, the novel lung disease weighed on sales in January. The Corona virus and the New Year earlier this year saw deliveries of all brands in China drop to 343,400 vehicles - a drop of 11.3 percent compared to the previous year. Worldwide, this caused sales to decline by 5.2 percent.

Volkswagen recently postponed the start of production at its factories in China due to the epidemic. The reason was delays in the resumption of nationwide supply chains and the limited travel options for employees, it said. VW also temporarily suspended production in China.

BCG press

study

Deliveries VW 2019

Source: merkur

All news articles on 2020-02-17

You may like

Trends 24h

Latest

© Communities 2019 - Privacy

The information on this site is from external sources that are not under our control.
The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.