Virus Doesn’t Bode Well for an Already Ailing Market

GM

Just as airlines around the world cut ties with China, automakers who do business in the coronavirus-hit country are scrambling to deal with the outbreak — delaying production, keeping employees at home, and crossing their fingers.

Any predictions that 2020 would be a better year than 2019 — a potential springboard year for automakers busily tailoring their lineups to better serve the rapidly evolving Chinese market — are now due for revision.

As the virus spreads throughout China (as of Wednesday, illness was reported in every region, but it remains centered in the country’s manufacturing heartland), automakers are being spurred into action.

Three days ago, the Detroit Three automakers all announced travel restriction to mainland China, with Fiat Chrysler banning all outside travel to the country. General Motors said only critical business decisions could get its executives on a flight, and even, then there’d be screening in place for the individual. Ford banned all travel to the outbreak’s epicenter, Wuhan.

The continued spread of the disease, the locking down of several population centers, and Wednesday’s raft of airline announcements should bring most travel into China to a halt. Luckily for companies, the country is currently celebrating its Lunar New Year, with the holiday scheduled to wrap up February 2nd.

What happens then is still a work in progress. Travel restrictions within the country could keep workers who left home for the holiday away from their workplace, and several jurisdictions have elected to just extend the holiday.

As reported by Automotive News, Volkswagen — a major foreign player in the Chinese market, plans to keep Beijing employees home for two weeks; its two joint ventures won’t restart production until February 9th and 10th, respectively.

BMW Group chose to extend the holiday until Feb. 9, assuming many workers wouldn’t be able to make it into work. A government-imposed shutdown will also see Tesla’s new Shanghai Gigafactory idled for at least another week and a half after the official end of the holiday. Ford, on the other hand, plans to have its joint venture plants up and running ASAP.

GM’s presence in the country is vast, and one of its facilities resides in Wuhan. Its Chinese factories won’t come online until Feb 9. The same goes for Toyota. According to BBC, PSA Group, Nissan, and Honda have announced plans to evacuate staff and their families.

For suppliers, the situation is no different. Parts giant Magna said it would idle its numerous plants for an unspecified period of time.

The outbreak, which could be just getting underway, will undoubtedly impact a market whose new vehicle sales were already predicted to contract a further 2 percent in 2020. Last year saw the country’s sales fall over 8 percent, continuing a trend that began in 2017. Of the Detroit Three, GM’s Chinese business fared best in 2019, which isn’t saying much. Sales sank 15 percent for the year — a far better result than Ford’s 48-percent drop and FCA’s 41-percent decline.

[Image: GM China]

Leave a Reply