Automakers — and their accountants — are playing the wait-and-see game as the coronavirus outbreak continues to grow in China, throwing the assembly of crucial vehicle components into disarray.
Korean automaker Hyundai has now announced its domestic plants have gone dark, citing supply chain disruptions born of the virus and the aggressive lockdowns enacted to curtail its spread.
As reported by the Financial Times, the Korean manufacturer has had to shut down its assembly plants after its supply of engine wiring harnesses ran dry.
Last week, China extended the Lunar New Year holiday in order to restrict movement, leaving the country’s vast manufacturing heartland idle for an extended period. Many automakers and suppliers, depending on locale, have opted to stay that way, as regional shutdowns of transportation means many workers would not be able to show up.
Hyundai claims it’s on the prowl for a new supplier, adding that the shutdown could end by next week. The move impacts only the production of Hyundai-badged vehicles, it said, not Kia products.
As the virus spreads (more than 20,000 citizens were reported infected as of Monday), automakers anticipate continued disruption. And not just in China proper.
“Restrictions on movement and other measures have raised the risk of disruption to supply chains, and we see potential for a stalling in automobile production within China,” said analysts at Japanese financial services company Nomura. “We also see a risk that supply chain issues could have knock-on effects on production in Japan and elsewhere in Asia.”
Even if production levels are maintained, automakers foresee a hit to their profits in the massive new-car market. Residents under lockdown will not be purchasing new cars. Moving parts production out of China would also weigh on a company’s balance sheet.
The New Year’s surprise comes as automakers across the globe attempt to pivot to electrification amid declining sales in both Western markets and China, incurring no shortage of red ink in the process. Coronavirus is the last thing they need.
“The inescapable fact is that even in our milder scenarios the downside to earnings estimates looks severe,” said analysts at Bernstein.
[Image: Hyundai]
Head Acoustics HMS III with an NI cDAQ-9171 (nerd.)
Yeah, but what’s with the second set of mics taped to the head of the HEAD?
Maybe they are looking at headrest mics for antinoise.
possibly, or just the actual ANC mics used in the vehicle for calibration purposes.
Interesting – as much as I’ve worked on my kids’ Kias, I haven’t seen any Chinese parts yet. But after having owned a Cruze (RIP), I would think GM has more to worry about.
Speaking of Guangzhou Motors, what happened to DeadWeight, anyway?
Deadweight.
Jeez (chuckling)
I miss him too. Scorched earth vitriol spewed in an artful way feeds my soul.
LOL! Deadweight only makes sporadic and intermittent appearances as of late, few and far between.
There are several commenters who have left the board.
And that’s too bad.
The parts that are in short supply are wiring harnesses, so that’s why you likely haven’t noticed.
“Speaking of Guangzhou Motors, what happened to DeadWeight, anyway?”
Does the word “Dead” ring a bell? I would never choose such a nickname. Call me superstitious.
This is not surprising at all. Of the people I know in China, none are returning to work anytime soon. One lives in a complex with private security keeping people out. Two were on vacation when the outbreak started, and delayed returning as long as possible.
It should get really interesting over there when the schools reopen…
Every year we have an outbreak that kills FAR more people. It’s called the flu.
Why this corona virus is even news is beyond me.
because it’s new, it’s unknown, we’re not sure about how exactly it transmits from person to person, we have no treatments, and no idea how things are going to progress.
Influenza, on the other hand, goes around all the time, we have treatments/preventative measures, and usually doesn’t end badly for non-immune compromised people.
“Why this corona virus is even news is beyond me.”
Because there is nothing else for news companies to make money on besides the farce called “impeachment” which no one is watching anyway.