How COVID-19 Is Impacting The Automotive Industry
Image by Arek Socha from Pixabay
We are barely through the first quarter of 2020, and what a year it's already been for the whole world! One of the biggest things happening right now is the spread of the 2019 coronavirus which started in Wuhan, China. Now known as COVID-19, the disease has spread to countries across Asia, Europe, North America, and Africa.
On the surface, this may seem like a medical emergency. However, it's also one that has economic impacts. When major cities go on lockdown to try and contain the virus, it's much more difficult for people to work and be productive. Businesses and whole industries end up suffering, and the automotive industry is no different.
Here, let's look at five ways that COVID-19 is affecting the automotive industry specifically.
Chinese Automotive Factories Are Shut Down
China is a vital part of the automotive industry's supply chain. As reported by WZZM 13, 11 of 31 provinces in China have delayed asking their workers to come back to work. Many automotive businesses have been shut down since the Chinese New Year. Because of the coronavirus, they've been forced to push back their reopening farther and farther.
Local car manufacturers are not the only ones impacted by this shutdown. Foreign car companies, especially those from Japan, also have car manufacturing plants that are located in China. These plants are also being impacted the same as the rest as a result of the coronavirus situation.
This doesn't just mean that many China-based factories aren't active and producing cars. It also means that they aren't producing car parts that were meant to be shipped to car manufacturers all over the world.
This is soon to be a significant problem for automotive businesses in other countries, as many of them use 'just-in-time' inventory systems. What this means is that they don't keep excess amounts of spare parts in their factories, so instead, they rely on suppliers to send the right quantities at the right time.
According to The Guardian, some companies have even transported car parts from China to the UK in suitcases. It seems that companies are doing whatever they can to fill in the supply gaps caused by this crisis.
A Global Chain Reaction in the Automotive Industry
When overseas car factories can't get the parts they need, they too will be forced to shut down indefinitely. For example, the Wall Street Journal has reported that General Motors plants in Michigan and Texas are going to be running low on parts. This will affect the manufacturer's ability to produce specific SUV and truck models.
You can already imagine what this might mean for other manufacturers as well. If they can't get the car parts they need, these manufacturers will probably be forced to shut down their production until they can restock those parts again.
This creates a sort of domino effect. When plants can't produce the necessary parts, manufacturers can't provide specific models. Those models will be unavailable at local dealerships, and customers won't be able to purchase the vehicles they want.
Overall, the automotive industry will slow down until such a time that the supply chain can be brought back up to full efficiency.
Car Sales in China Are Being Affected
All of the above has caused a domino effect to take place in the global automotive industry. As a clear indicator, automotive sales in China have already made a dramatic plunge.
According to The Guardian, car sales in China have dropped by as much as 92%, and most car dealerships are still closed as a preventative method. It seems that would-be car buyers are still staying at home instead of heading to dealerships to purchase vehicles.
It's still not clear how this has impacted automotive sales in other countries. Perhaps it will take a bit more time before the effects are felt overseas.
Some Factories Are Being Repurposed
In China, many manufacturers are also repurposing their efforts towards fighting the coronavirus. NHK reports that some automakers are already using their staff to help produce face masks instead. Some parts of their factories and machinery have already begun operating to produce these masks. This is to help with the massive shortage of masks in the country and elsewhere all over the world. These masks and other protective gear are crucial not only for everyday users but especially those on the front-lines like medical workers.
One reason why this is possible is that automakers have a high level of expertise when it comes to automation. According to some industry leaders, that expertise can be repurposed to help with increasing the production of facial masks to protect people from the spread of the virus.
Japan is Even Setting Up A Special Task Force
Countries overseas have also started paying attention to the coronavirus' impacts on the automotive industry. According to CNBC, the Japanese government has set up the "New Coronavirus Countermeasures Automobile Council" to help cope with the challenge. This matter is of great importance to the Japanese automotive industry because there are many Japanese automotive plants based in China.
The aim of this council is to minimize the negative impacts caused by the coronavirus on the automotive industry.
What Next?
The coronavirus is still ongoing, and countries all over the world continue to be affected by it. As far as the automotive industry is concerned, the effects are already felt very strongly, as explained above. Manufacturers are already facing troubles producing some models, and others can't get the parts they need to run their businesses.
As end-users in the automotive supply chain, we may eventually feel the effects as well. Perhaps some car owners will find it challenging to get the spare parts they need for their vehicles. Car buyers may not be able to get their hands on certain car brands and models that they want.
All of this depends on how long more the coronavirus crisis will go on. Once it has subsided, and the industry slowly recovers from the challenges it's now facing, then perhaps things will return to normal.