Feb 17 2020
Secure Your Novated Lease Now to Avoid Lengthy Delays
With cheap and quick manufacturing, China is seen as a promise land of sorts for many American, European and Japanese automakers. The auto industry is heavily dependent on Chinese labour and manufacturing, it makes more cars than any other country and accounts for the largest market in the world. In 2018, China alone shipped nearly $US35 billion of parts to auto plants around the world. Of which $US20 billion were exported to the US. It comes as no shock that this industry is the latest in a long line suffering from the recent Coronavirus outbreak. The costs to businesses could become severe in the coming weeks.
Giants such as Volkswagen, Toyota, Daimler, General Motors, Renault, Honda, Hyundai, Nissan and many other Chinese car brands have invested heavily in China for their manufacturing, leaving them suffering from the aftereffects of the coronavirus. Many plants producing vehicles for these companies have been ordered to remain shut down until at least mid-February as the Chinese government attempts to contain the virus.
Wuhan and the rest of the Hubei Provence is an auto manufacturing hub for China, accounting for 9% of total Chinese auto production. With almost 60 million people still under lockdown in China, following the countries national holiday for Chinese New Year, S&P Global Ratings has stated that carmakers will be forced to reduce production by around 15% in the first quarter of 2020.
Volkswagen, the worlds biggest automaker, is one of the most affected brands, with 24 plants located in China accounting for 40% of its total production. However, in a statement on the 5th of February, Volkswagen assured customers that its supply chain “is on track to be fully functional in time for the start of production” and that planned deliveries to customers haven’t changed.
The closure of Chinese auto plants has already begun to have global affects for other factories. Hyundai and Renault have had to shut down their plants in South Korea due to them being unable to continue operations without Chinese parts. Further, Nissan’s plant in Kyushu, Japan would have “production adjustments” as a result of the Chinese parts shortage. Outside of Asia, Fiat Chrysler announced that one European plant is at risk of closure due to the lack of Chinese parts over the coming weeks.
The saving grace for the automotive plants was the extra stocking up of inventory over the Lunar New Year. This is why the industry is only beginning to experience the affects of the prolonged closure now. As the extra inventory depletes, coupled with the Chinese factories remaining shut down, it is expected that more plant closures will be seen globally.
As a result, reports indicate that the short-term vehicle supply is currently fine, however there will be a struggle to supply vehicle parts and components for mid to long-term supply. Remunerator urge all customers to order their new cars as soon as possible to avoid vehicle shortages and lengthy delays.
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