Summary: Domestic automobile industry
delayed time of resumption, postponed launch plans, and faced shortage of
components and weak performance in real economy due to the current epidemic control.
Automobile
factories delay reopening
According to public data, during 2019, the province of
Hubei produced 8.8% of all cars produced in China, ranking fourth among all
Chinese provinces in terms of production volume. The same data shows that at
the end of 2018, over 1,482 companies in Hubei produced and sold cars.
Furthermore, the city of Wuhan, the capital of Hubei, is one of the four main
cities of China for selling cars, including American, Japanese, French,
British, and Chinese brands.
Among these companies, Dongfeng Automotive
is located in Wuhan. In order to take measures against the coronavirus,
Shenlong Automotive stated that it would not resume business before February
14, and Dongfeng Honda also tentatively decided on Febraury 14 to
resume business. Dongfeng Renault, Dongfeng Passenger Vehicle, Dongfeng
Business Vehicle, and other company branches also postponed their resumption of
business.
Honda
and Toyota hit especially hard by virus
Due to the coronavirus, the reopening of
factories in Hubei has been postponed for many companies, including Toyota,
Honda, Hino Motors, Tesla, Ford, and Dongfeng Automotive. These companies plan
to enter a period of halted production. Honda and Toyota are two Japanese car
companies with a large sale volume in China, selling 1.55 million vehicles and
1.62 million vehicles in China during 2019, respectively. Chinese consumers
display trust in these two companies and consider their products to be of high
reliability.
With this halt in production, however, the
total company sales of 2020 will likely experience major effects. The most
direct effect of the production postponement will be a limited production
ability, which in turn will affect how many vehicles the companies are able to
sell. Indeed, both companies saw decreased sales during January and February,
2020. Furthermore, not only will the factories producing the main vehicle
components be halted, but the assembly locations located later in the
production chain will stay closed as well. Without the necessary parts being
produced, these companies will undoubtedly experience severe effects with
regard to their sales.
Consumers
and producers both hesitate to go to market
With regard to consumers, those whose
demand for a vehicle is highest are workers who need to travel to factories for
work. Due to the delay in factory resumption, these workers must wait longer to
receive a salary, and furthermore, the crashing economy is leading to a
reduction in business revenue, which affects wages and job stability.
Therefore, consumers with a high demand for a vehicle currently possess weaker
purchasing power than normal, which will likely cause as many as a third of
these consumers to delay their plans for vehicle purchase.
Some analysts claim that due to the
development of the virus, laypeople will lose trust in public transportation,
which may lead to an increase in vehicle purchases. However, regardless of the
demand for vehicles, if consumers do not possess the purchasing power to match
their demands, then apart from the aforementioned factory workers, almost all
vehicle consumers will be residents of first and second tier cities. However,
due to limited trade between cities, these consumers will be temporarily unable
to purchase vehicles.
From an industry perspective, if the virus
does not slow down, then companies’ plans for releasing new cars will be
affected. Any new models that these companies plan to release must be delayed
until later in the year.
For more information on China’s automotive
market, please check our Li-ion
battery China E-News.