Fears are rife that the worsening coronavirus epidemic is likely to wreak havoc on China auto sales and production in the first quarter, but the effects could ripple through supply chains worldwide if the outbreak continues to expand and the big test could come when factory workers return from holiday breaks in high-contagion areas.
Seeking to rein in the epidemic, which has killed more than 200 people, authorities over the weekend extended the weeklong Lunar New Year holiday by three days to last Sunday, February 2.
In mainland China, 11 of 31 provinces, representing more than two-thirds of automobile production in the country, have announced that returning to work for all non-essential businesses would be delayed to next week Monday on top of the extended holiday. That’s in addition to broad shutdowns of road, rail and air logistics and passenger travel.
Prior to the outbreak, forecasts for the world’s largest auto market this year had ranged from mild sales growth to small declines after two painful years of contraction due to a slowing economy, the U.S.-China trade war and the chaotic introduction of new emission rules.
Auto analysts at IHS Markit had already forecast 10% lower first-quarter production volumes in China before the crisis began, and they released new estimates on Friday.
Assuming no further disruptions, IHS predicted a first-quarter production decline of 350,000 units, or a 7 percent drop. But the analysts said a worsening crisis that keeps plants idled into mid-March could trigger a disruption across China’s massive supply chain, with the possibility of 1.7 million units worth of lost production in the first three months, a drop of 32.3 percent from expectations before the coronavirus outbreak.
China, the world’s largest automotive market, is already coming off slowing sales and industrial output. The China Association of Automobile Manufacturers said overall vehicle production totaled 25.721 million units in 2019, including commercial vehicles, down 7.5 percent on increased trade friction with the United States, lower subsidies for new energy vehicles and other factors. Sales slid 8.2% to around 25.77 million vehicles.
MIKE OCHONMA
