Car manufacturing industry will experience a serious hit by the outbreak of coronavirus

The outbreak of coronavirus has already affected many people and took hundreds of lives. At the same time, it has hit the businesses pretty hard as well in the last couple of weeks.

The main reason for that is a great reliance of foreign companies on parts manufactured in China. Therefore, many experts are worried that the production of cars worldwide can be severely damaged if the plants across China will remain closed for a longer period of time.

Mike Dunne, a consultant to the auto industry in Asia and the former head of GM’s operations in Indonesia, commented:
“It only takes one missing part to stop a line.”

Meaning that it is impossible to build a car with only 99% of all parts. The main complication is that China has been a main supplier of auto parts for a very long time now. It has been shipping almost $35 billion worth of parts in 2018. And about $20 billion of parts manufactured in China were shipped to the United States that year.

Finding alternatives for Chinese auto parts will be challenging for the manufacturers and very time consuming as well.

Kristin Dziczek, vice president of the Center for Automotive Research is convinced that:
“It’s difficult to say when it will start to bite here. I would expect to see a cascading global impact by the end of February if Chinese production doesn’t come back [this week]. All automakers have a supply chain war room going on right now to determine what they can be doing. But China is so huge, there is no way they cannot be impacted.”

For the moment, many car manufacturing companies have already shut down their plants all over Asian region. For instance, Volkswagen announced that they are planning to keep their plants closed until February 15 at least.

Moreover, Hyundai shut its plants in South Korea simply because it’s impossible to keep it running without Chinese parts needed for that. Renault is also suspending production at its plant in Busan, South Korea. Fiat Chrysler has recently announced that one of its European factories is in serious danger due to the lack of auto parts that were usually coming from China.

Simon MacAdam global economist at Capital Economics in London mentioned:
“At the moment it’s rather difficult to tell. A supply chain is only as strong as the weakest link. That’s why there’s such uncertainty about estimates.”

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