Forget about clinging to hopes that China, the world’s largest light-vehicle market, will recover from its unprecedented two-year slump anytime soon.
Though concrete estimates on the financial toll of the coronavirus outbreak are still scarce, signs are emerging that the final cost will far outweigh that of the 2003 SARS epidemic, when China’s auto market was one-sixth the size it is today and smaller than that of Japan.
Tesla Inc., Volkswagen Group, Toyota Motor Corp. and PSA Group have warned they anticipate disruptions, while a top parts supplier predicted automakers will cut China production 15 per cent this quarter.
China’s car and light-truck sales were already heading for the lowest in at least five years before the current outbreak forced authorities to lock down the epicenter of Wuhan city and beyond. Now, it’s unclear when consumers will come back to showrooms as 14 provinces and cities that accounted for almost 70 per cent of the country’s gross domestic product shut businesses and factories until at least the second week of February.
“The risks are enormous because of the sheer weight of China in the global market and its importance to trade,” said Jean-Louis Sempe, a Paris-based analyst at Invest Securities. “Predicting the seriousness of the epidemic is very difficult, but there’s no doubt the impact could be huge on factories, supply chains and domestic car sales.”
Automakers with plants in Hubei province and its capital, Wuhan, where transport links have been cut to curb the virus, are most vulnerable. Delays can often be made up later with extra shifts on weekends and at night.
Honda, which has three assembly plants in Wuhan with Dongfeng Motor Group, said it was assessing how transport disruptions were affecting the supply of parts and that no decision had been made on when its factories will restart. Dongfeng, Renault and PSA also said no decision had been made on when production might resume. General Motors also operates a joint venture plant in the area.
Should passenger-vehicle sales in China fall 20 per cent from last year’s 21.4 million units, that would threaten to end the country’s run as the world’s largest auto market, a rank it’s held for more than a decade.