At the beginning of 2020, the novel coronavirus pneumonia (NCP) has swept the Chinese New Year. Until February 14th, the cumulative number of NCP patients in China reached 75,000, of which Hubei Province, the worst-hit area, accounts for 75%. Besides, it has spread to more than 20 countries around the world. What does it mean to the world economy, especially to the global automotive industry?
The new coronavirus has cast a heavy haze over the Chinese New Year. At present, China is at a critical stage of epidemic prevention and control. Under the guidance of the government, the Chinese enterprises have orderly resumed production.
However, due to the impact of the NCP epidemic, China and the global economy are facing greater challenges. Especially the global supply chain market will face many challenges because of the suspension of Chinese factories. From the day of February 10th, Chinese factories have resumed production one after another, but companies still are confronted with some big problems, shortage of self-use epidemic prevention materials, low logistics business efficiency, blocked supply chains, shortage of raw materials, and lack of manpower because of the difficulty in returning to working cities. Some companies have to shut down the workshop due to insufficient supply of raw materials. Some start to consume a small amount of inventory that was reserved before the Spring Festival, which will not last long, and it will stop the production until the raw materials come.
With the refinement of the division of labor in the industrial chain, a strict division of labor in the supply chain has been formed nationwide and even globally, more and more worldwide companies are facing the same situation. The global industry chain refers to a cross-enterprise network organization that connects the production, sales, recycling, and management processes in order to achieve the value of a certain commodity or service on a global scale. As a key part of the global supply chain and an important consumer market, China has ties closely with the world economy.
On January 31, 2020, after the World Health Organization (WHO) defined China’s new crown epidemic as a public health emergency of international concern (PHEIC), there have been 71 countries ’immigration controls on air routes, and many countries have introduced adjustments (cancellations) to flights, even banned entry. In terms of maritime transport, the port of Singapore has increased strict quarantine procedures for all ships that have visited the Mainland within 14 days. These will also become a major obstacle to the operation of the global economy
Great pressure on the global automotive industry
The Chinese government has decided to extend the spring festival to February 10st., which bring the huge impact to the automobile industry. Generally, cars are assembled from about 10,000pcs independent parts with different suppliers from different countries. China is the most important Participants of the parts manufacturing. The continuous impact of the epidemic has led to the grim difficulty of resumption. The impact of the new epidemic on global supply chains has deepened, and global car companies have raised red warnings.
On January 31, 2020, Hyundai Motor said that it plans to suspend the production of Palisade SUV models in South Korea at the weekend in order to response the shortage caused by the NCP outbreak. Affected by the interruption of China's supply chain, on February 4, Hyundai suspended all three domestic assembly plants, including the production line of the high-end car "Genesis".
From February 14, Nissan will temporarily close its plant in the island of Kyushu in southwestern Japan. Nissan also became the first car company to stop production in Japan due to the epidemic.
Some plants of GAC Toyota, FAW Toyota, and Dongfeng Honda jointly operated by Toyota and local partners have postponed the resumption of work caused by epidemic spreading and parts lacking, and plan to resume production after February 17.
Jaguar Land Rover's two plants in the UK will cut or stop production, which will continue until the end of March. Fiat Chrysler also warned of a possible shutdown.
Volkswagen has 14 joint ventures in China, of which 6 have resumed production and another 8 will resume on February 17.
On February 6 Beijing Benz has sent a letter to the Tianjin Municipal Government to request the special approval of resumption for its 19 spare parts suppliers in Wuqing district.
Tesla is reopening its Shanghai super factory this week. The company recently said that due to the new coronavirus epidemic, the new model cars would be delayed to the market.
As of February 14, the Chinese factories in major cities have begun to resume work. However, the absence of personnel cannot be resolved in the short term. Especially in Hubei Province, the hardest hit area, the company's resumption time will continue to be delayed. As China's four major automobile bases, with a total of 2.24 million vehicles produced in 2019, and half of the world's top 20 auto parts companies including Bosch, Valeo and ZF are located in Wuhan, the related commercial cooperation and supply markets will still be unavailable in the short term.
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