|Several automakers are now working to restart their manufacturing in China and are preventing operations in other countries due to supply shortages, reported business news provider CNBC / Photo by: Siyuwj via Wikimedia Commons|
The global auto industry is also not immune to the coronavirus disease 2019 (Covid-19), which was first encountered in Wuhan, China. Several automakers are now working to restart their manufacturing in China and are preventing operations in other countries due to supply shortages, reported business news provider CNBC.
Auto Parts Shortage Affecting Carmakers
One of the world’s largest automaker, Fiat Chrysler Automobiles NV, for instance, said that it will be temporarily halting its production in Serbia because they lack parts that usually come from China. This production stoppage is a sign of how the coronavirus is creating a domino effect in the world supply chain. General Motors Co. has also paused its production at plants in Texas, Indiana, and Michigan, USA. GM spokesman David Barnas mentioned that inventory of certain parts in their truck and SUV plants are running low. Nevertheless, they are not anticipating an impact on their full-size truck production as of the moment.
The United Auto Workers chapter, which produces the full-size SUVs of GM, likewise told CNBC that their production may be disrupted because of supply issues. Barnas said that to mitigate the risks in their production, they are monitoring their supply chain and remaining in close communications with their Tier One suppliers. If their plants will be idle, he said, it can impact the production of their vehicles such as the GMC Sierra pickup trucks, Cadillac Escalade SUVs, GMC Yukon, Chevrolet Suburban, Chevrolet Tahoe, and Chevrolet Silverado.
Japanese multinational automobile manufacturer Nissan will also halt production in one of its factories as it cannot get parts from China but stressed that there will be no impact in their other factories in Japan. South Korea’s Hyundai has likewise temporarily shut down some of its factories in their home country because of an auto parts shortage.
“It only takes one missing part to stop a line,” Asian car industry consultant Mike Dunne said via British public service broadcaster BBC.
|One of the world’s largest automaker, Fiat Chrysler Automobiles NV, for instance, said that it will be temporarily halting its production in Serbia because they lack parts that usually come from China / Photo by: Greg Gjerdingen via Flickr|
The Importance of China in the Global Auto Industry
China is a major player in the global auto industry primarily because it makes key components and parts. Hubei, the province where the COVID-19 outbreak started, is a major hub for car manufacturing.
Database company Statista shared the export value of Chinese automobile parts and motorcycle in the following years: 2005 (US$ 14.85 billion), 2006 ($25.78 billion), 2007 (33.96 billion), 2008 ($38 billion), 2009 ($33.16 billion), 2010 ($47.16), 2011 ($61.02 billion), 2012 ($66.32 billion), 2013 ($65.51 billion), 2014 ($64.62 billion), and 2015 ($61.92 billion).
In 2017, the country was also the world’s leading car manufacturer as it was able to produce 24,806,687 cars and 4,208,747 commercial vehicles. This is based on the statistics provided by International Organization of Motor Vehicle Manufacturers (OICA). China is followed by Japan (8,347,836 vehicles manufactured), Germany (5,645,581), India (3,952,550), South Korea (3,735,399), USA (3,033,216), Spain (2,291,492), Brazil (2,269,468), Mexico (1,900,029), France (1,748,000), UK (1,671,166), Iran (1,418,550), Czech Republic (1,413,881), Russia (1,348,029), and Turkey (1,142,906).
The 2018 vehicle production of China also accounted for more than 30% in the world, which exceeds the number of vehicles produced by the United States, Japan, and the European Union combined.
The US produced about 12 million cars and trucks in 2018 compared to China’s 1.774 million cars. Japan, on the other hand, produced 10% of the world’s vehicles in 2018 and was among the countries with the highest exports of cars. Germany produced nearly six million cars in 2018.
Although Indian-manufactured cars are not well-known in Europe or America, India still made about one billion total vehicles in 2018, 82% of which were personal cars. This was the reason for the automotive industry in India having a higher growth rate compared to other countries. South Korea produced nearly 4.5 million cars in the same year, 4.1 million of which were personal passenger cars, detailed financial platform Investopedia.
Fiat Chrysler’s halting of operation is the first instance when an automaker had to temporarily shut a car factory plant in Europe because of the coronavirus. In a statement, the company said that they are currently in the process of securing the future supply of the affected parts. They are also expecting the production to be restarted before February ends. Their spokesman refused to share additional details about their company’s situation in China but said that they are monitoring the developments there.
Honda Motor said that its employees in China are expected to return to their post by the end of February after the restart of their production in Wuhan.
|China is a major player in the global auto industry primarily because it makes key components and parts. Hubei, the province where the COVID-19 outbreak started, is a major hub for car manufacturing / Photo by: Vmenkov via Wikmiedia Commons|
How About Finding Replacements From Other Countries?
Michigan think tank Center for Automotive Research’s Vice President Kristin Dziczek shared via CNN, an American news-based pay television channel, that it is not practical for automakers to find replacements for their car parts from other countries if the supply chain will continuously be disrupted. She said that if the Chinese production will not come back, there will be a “cascading” impact worldwide. Automakers from other countries even have a “supply chain war room” to decide where they can rely on if not China.
London-based economics company Capital Economics’ global economist Simon MacAdam said that there is such uncertainty when it comes to estimates as a “supply chain is only as strong as the weakest link.”
Global carmakers can, of course, get their automotive parts from countries known to have exported the highest dollar value worth of automotive parts. These include Germany (16.3% of total auto parts exports in the world), US (11%), Mexico (7.2%), South Korea (4.7%), and France (3.8%).
Possible Labor Shortages in Factories
MacAdam added that even if the car factories in China will resume their operation, it remains unclear if they can operate the way they did before because of possible labor shortages. The worst thing that could happen is that it can further spread the disease. This means that getting these car parts from China will no longer be “business as usual.” There will be cities that will still have roadblocks and some airports that don’t have flights.
The world’s automotive industry should brace to take the hit while authorities are struggling to contain the virus.