Japanese Automakers Stand to Lose $1.6 Billion From Coronavirus: Analysts

Coronavirus outbreaks are shrinking sales expectations around the globe, but it’s Asia that has the most to lose. We’ve already seen rolling reports of the Chinese market’s virus-related decline — an affliction that’s spilling over into neighboring regions as more people fall ill and others stay home to avoid contagion. Employees, parts, and customers are all in short supply.

Goldman Sachs now predicts global sales will decline 3.5 percent in 2020. It’s a considerably more foreboding estimate than the 0.3-percent contraction predicted just last month, and the decline is presumed to hit Japan the hardest — after China, of course.

Waning demand is expected to evaporate 170 billion yen ($1.6 billion) from the country’s top automakers, according to Automotive News.

“Even if production resumes along the lines we are assuming, recovery will hinge on end-user demand in China,” analyst Kota Yuzawa wrote in the report. “While these figures tend to be highly volatile, automakers are clearly facing challenges from both a production and sales perspective.”

From Automotive News:

The spread of the illness, which has shut down factories in Hubei, China’s fourth-largest vehicle-manufacturing hub, has had a ripple effect across the global auto industry. Toyota Motor Corp., Nissan Motor Co., Honda Motor Co., Mitsubishi Motors Corp. and Mazda Motor Corp. rely on parts from the country even if they assemble vehicles elsewhere.

All told, the five manufacturers will build 580,000 fewer cars from January through April compared with Goldman Sachs’s previous estimate. Among them, Toyota is estimated to run at 94 percent of the bank’s prior projection during the period, while Honda will be at 16 percent, and Nissan at 47 percent.

Last month, the government-backed Chinese Association of Automobile Manufacturers estimated sales declines of around 40 percent in the January-to-March period from a year earlier, with production volumes falling by up to 60 percent. With Chinese auto sales down 83 percent in the third week of February, the reality could be quite a bit worse than initial estimates suggest. It all hinges on how quickly China can wrangle the virus and get things back to normal.

Japan is considering temporary legislation on March 12th that would enable the government to declare a state of emergency if necessary; it already plans to restrict travel from China and South Korea ( also hit hard by COVID-19) for a period of several weeks. The country recently formed the New Coronavirus Countermeasures Automobile Council to help automakers prevent the spread of the virus while contending with component shortages.

[Image: Toyota]