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As far as China is concerned, the impact of the epidemic on the automotive industry

May 14, 2020

Some people are uncomfortable in delaying the resumption of work.Originally according to the regulations, today should be the first day of the official resumption of work after the delay of the Spring Festival holiday. However, because of the different severity of the epidemic in various regions, many companies have extended their holidays after the Lantern Festival, or switched to online offices. For an industry such as the automobile industry that relies heavily on manpower to actually operate, postponing the start of a day’s work may result in large direct or indirect economic losses.
Taking SARS in 2003 as an example, even though the domestic manufacturing industry had been developing at a high speed at that time, the terminal market was in short supply, and many factories had staff returning to their posts during the SARS period. 16.85%. However, compared with the past, the economic losses caused by this year’s epidemic are absolutely overwhelming, especially in Hubei (at least in the short term).
As far as China is concerned, the impact of the epidemic on the automotive industry
On the one hand, the production side is blocked. In order to prevent the epidemic from further spreading due to the return peak, the State Council extended the Spring Festival holiday, which caused many factories to postpone the resumption of work, which caused the most direct consequence is the production capacity. Take Dongfeng Honda for example. According to a report by China Daily, three factories were built in Wuhan, with a total annual production capacity of approximately 63.2 units. If other factors are not taken into account for rough estimation, the daily production capacity of Dongfeng Honda can reach about 1755 units. Coupled with some sporadic expenses such as labor wages and machinery, the economic loss can be imagined every day when the work is stopped. I also checked the Dongfeng Group’s stock index by the way. From the announcement of the extension of the Spring Festival holiday on January 27, to the opening of January 29, the group’s stock fell by 9.46%. Although there is no guarantee that the 100% decline is due to the delay in resumption of work, from the timeline point of view, the delay in resumption of work is at least one of the influencing factors.
As far as China is concerned, the impact of the epidemic on the automotive industry
In addition, after the announcement of the delayed resumption of work, Tata also said that the outbreak of this outbreak may cause Jaguar Land Rover’s expected profit in fiscal year 2020 to fall by nearly 3%. Competitors are uncomfortable, is it better for OEMs in other regions? I don’t see it. You should know that Hubei also has many parts factories, such as Webast (skylight supplier), Johnson Controls (seat supplier), TRW (airbag), MAHLE (filter system), etc. Their postponed resumption of work will also affect the production capacity of factories in other regions to a certain extent, and also affect the research and development progress of some models because supplier parts cannot be followed up in time.
As far as China is concerned, the impact of the epidemic on the automotive industry
Regarding the economic impact of supply chain disruption on OEMs, there is a case for reference. As early as 2010, People’s Daily reported that Honda’s parts factory in China triggered a large-scale strike due to worker wages, which caused the factory to stop production. According to the estimates of the management staff at that time, the total daily loss had exceeded 240 million yuan. Moreover, it does not include the loss of upstream parts and components supporting factories and the loss of downstream distributors. As another example, Hyundai officials recently said that because of the interruption of the supply chain, the company will plan to suspend the production of Palisade SUV models in Korea this weekend. Not only that, but also Ssangyong Motors, which is also local to South Korea, will also close its factories in Korea from February 4 to February 12 due to problems in the Chinese supply chain. Moreover, if you continue along this line, there may be a situation afterwards-the slowdown of new car listing nodes and the listing of new cars. This may result in increased publicity costs and poor publicity.
As far as China is concerned, the impact of the epidemic on the automotive industry
On the other hand, the purchasing power of consumers on the sales side is weakened. This link is actually easy to understand. The general logic is that consumers have reduced their outings because of the epidemic, there is no staff circulation in 4S stores, and because of economic impact, consumers’ purchasing power has been impacted, which has led to a decline in sales. So from an economic perspective only, postponing the resumption of work is like a butterfly flapping its wings, which can trigger a series of chain effects and economic losses. Of course, from the overall perspective, this delay in resuming work is correct and necessary. After all, compared with the safety of the people, this economic loss is acceptable. And the country has introduced many corresponding policies, such as lowering loan interest rates, increasing credit loans, etc., to reduce the economic pressure of enterprises as much as possible. In addition, the crisis has also been accompanied by opportunities. Many brands have derived “Internet + style” means such as online car viewing, live video selling, such as Weilai and Tesla. This may stimulate the industry in the future, thus bringing different sales methods. Moreover, waiting for the epidemic to be resolved, the long backlog before buying may cause the car market to usher in a wave of car buying peaks, and those due to inventory backlog may also be relieved to a certain extent.
As far as China is concerned, the impact of the epidemic on the automotive industry
So in general, although the road ahead is difficult, but there is still light, let’s work hard.

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