Nissan Motor Co. and PSA also have assembly plants in Wuhan or the broader Hubei province and are partners with Dongfeng. Robin Zhu, an analyst at Sanford C. Bernstein & Co., singled out Dongfeng PSA as “by far the most exposed” because of the high proportion of vehicles it makes in the area.
“Investors will need to brace for a slowdown in broader activity levels in China,” Zhu said in a Jan. 27 note. “We expect the Chinese auto industry to endure a traumatic next few months.”
The virus continues to disrupt business and leisure travel, as well, with Delta Air Lines becoming the latest major carrier to suspend flights, beginning Feb. 6 through April 30, from the U.S. to China. United and American Airlines also temporarily halted flights between the U.S. and China
Automakers probably will dial back production by 15 percent in China this quarter after extending holiday shutdowns because of the virus, supplier Aptiv said Thursday. Aptiv, whose customers include GM and Volkswagen, expects its own production to fall 11 percent from a year ago.
Joseph Massaro, CFO for auto technology supplier Aptiv, said this week any delayed production could be made up in the second quarter. “We don’t view this as a full year issue at the moment,” he added.
The government extended the annual Lunar New Year holiday break — with its workplace closures — by several days to curb potential exposure. Tesla was among the companies saying they’re monitoring potential supply-chain interruptions for cars built outside China, as well.
“This will be horrendous in the supply chain, it’s going to be awful for companies and it will show in their quarterly reports and global strategy going forward,” said Rosemary Coates, a supply chain consultant and executive director of the Reshoring Institute, a non-profit focused on expanding manufacturing in the U.S. “It’s going to show and it’s going to hurt.”
The epidemic comes at a delicate time for the car industry, which faces sales slumps also beyond China, and pressure to make heavy investments in electric and self-driving cars. Compounding the danger for automakers is the overall economic slowdown, with the virus potentially shaving more than 1 percentage point off first-quarter growth in China’s gross domestic product.
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.
Cui Dongshu, secretary general at the China Passenger Car Association, said his prediction for 1% growth this year now seems “under some pressure”.
The holiday extension has discouraged dealers from ordering cars at the end of the month as is their usual practice, virtually guaranteeing a decline in sales for January.
“Although sales volumes in the first three weeks of January were okay, there was no ‘sales sprint’ at the end of the month. So it is inevitable that we will see a significant sales drop,” Cui said in a blog post.
