We are indeed in the midst of uncertainties as the deadly coronavirus keeps spreading outside the shores of China. According to a new report reaching us, the fallouts of the deadly virus could include a long term negative effect on the world’s auto market.
The global auto industry has taken a huge hit since the outbreak of the deadly coronavirus in China
From what we learned, the sales of cars have dropped exponentially in China as a result of the crawling economy for electric cars and also loss of tax incentives, all in the light of this coronavirus. Since it is spreading like wildfire, many manufacturing plants have been forced to shut down operations until the coming week as the Chinese government is taking drastic steps to eradicate this virus.
According to S&P Global Ratings, the deadly outbreak will compel many automakers across the continent of Asia to reduce the rate of production by 15% in the 1st quarter. Those who have plants in the highly affected City of Wuhan such as Honda, Renault, Nissan, PSA Group and GM are very much vulnerable to this virus. Unfortunately, they account for 9% of the overall auto production in China.
The heavyweight automaker, Volkswagen, is also heavily affected as the company has a chain of 24 car manufacturing factories in China, which is solely responsible for over 40% of its production worldwide. Volkswagen has recently revealed that there is no cause for alarm as planned deliveries will go as scheduled.
The supply chain and manufacturing of cars has gone downhill globally since the advent of the corona-virus
Video: Coronavirus shutdowns hobble Asian auto industry
If the crisis doesn’t subside, it will heavily damage the supply chains of cars on the planet. Massive suppliers such as Schaeffler, Faurecia, Bosch, Valeo, and Friedrichshafen are all in China. Consequently, South Korean automaker, Hyundai, has decided to halt production for now at its factories in the home country due to the effect of coronavirus on the supply of auto parts from China.
According to Simon MacAdam, global economist at Capital Economics, said:
“Even industries that appear to have low exposure to Chinese suppliers will almost certainly contain firms that are heavily reliant on inputs from China,” global economist at Capital Economics Simon MacAdam said. “It only takes bottlenecks in the production of one low-value, but crucial, component to bring higher-value, downstream production to a halt.”