How coronavirus has ravaged China's massive auto industry, dented global outlook
China has had the distinction of being the world's biggest automotive manufacturing country as well as the world's biggest automotive market for more than a decade. In 2018, three out of every 10 cars across the globe were manufactured in the country. Almost every major car maker has a manufacturing facility here which also supplies either parts or complete products to markets around the world. Recent times saw the Chinese domestic auto market struggle but the coronavirus outbreak in Wuhan and its spread has come as a shattering blow.
Sample this - China Association of Automobile Manufacturers informed last week that car sales crashed by 79% in February compared to the same month in 2019 - not that, that month was a high point because the downward spiral in demand had begun sometime in June 2018 itself. February of 2020, however, was unforgiving - Reuters reported that it was the biggest monthly decline ever in China with only 310,000 cars sold.
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Sale of even alternate-energy cars came crashing down with CNN Business reporting that the fuel-based segment saw a fall of 75% despite Chinese government's push towards such vehicles.
Dual recipe for a disaster ride
One of the biggest reasons for the massive slump in the Chinese automotive industry has been the spiraling demand from people at large. This, as mentioned previously, was already on the decline from 2018 but the coronavirus outbreak accelerated the fall exponentially. People in cities under lockdown, quite obviously, put priority on essential items and won't have been making trips to car dealerships. Elsewhere in the country as well, industry experts say people prepared for the worst and may have put off plans of making a huge investment in a vehicle for later.
The fear of going to a dealership in itself kept many prospective buyers out with several companies even offering online assistance and doorstep test drive and documentation. And in what can only be seen as the pinnacle of desperation, cities like Xiangtan and Foshan began giving monetary incentives to people who buy cars. (Full report here)
While demand fell on the one side, the other side which completed the twin-face of this disaster ride was companies shutting down factories for reasons ranging from containing the outbreak among its employees to avoiding product pileup. Although most of these suspensions were temporary, it included almost every major manufacturer - local and global, parts or final product. Tesla, which had opened its first plant outside the US just last year, too had to temporarily stop production.
Rippling effect worldwide
With China as a major automotive manufacturing hub, any disruptions here was bound to have a deep-rooted impact on facilities millions of miles away as well.
And it did.
Bloomberg reported in February that Nissan's US operations could potentially be hit because the Japanese company sources close to 800 parts for its cars manufactured here from factories at the epicenter of coronavirus outbreak in China.
Hyundai too had to suspend production for sometime in China which is expected to have an impact on cars it supplies to other countries from here.
In India, companies like Tata Motors, Mahindra and MG Motor admitted that supply of parts could hurt their operations. Even other OEMs who sought to reassure that they were adequately prepared never appeared to be adequately confident about it.
Changing gears to regain speed?
Industry experts believe that although coronavirus pandemic is still a very clear and present danger the world over, the worst may be over - at least in China. The number of confirmed cases here have been steadily declining while factories are slowly - but surely - limping back to life. The Chinese government reportedly plans a massive economic stimulus package to jump start industries which have borne the brunt of coronavirus and the automotive and aviation sectors, in particular, could benefit the most. Even still, it could take a long while for the Chinese automotive industry to actually return to its glorious years gone by and the global outlook remains quite bleak for all of 2020 and even going into 2021.
