How the Auto Industry Braces Itself for the Coronavirus Impact

Car Part World News

Mar 19th, 2020

How the Auto Industry Braces Itself for the Coronavirus Impact

Europe is currently the epicentre of the coronavirus crisis, which is now slowly creeping towards other parts of the world. It has affected all aspects of life and all sectors of society.

Amid safety concerns and demand deterioration, the automotive industry bears the impact from various directions. The supply chain (both new vehicles and auto parts) is disrupted, and the demand is taking a deep dive. 

EUROPE: Bracing Up for the Worst

Here’s a quick round-up on how the industry leaders are bracing up for the worst. 

As the coronavirus crisis builds up, more and more car companies are closing down – as can be seen from the major auto facilities in Europe, the current epicentre of the contagion. Concerns for employee safety, supply chain disruption, and deteriorating demand are three of the reasons that drive these auto giants to their knees. Plants and other facilities have started boarding up since mid-March, with most major automakers announcing temporary closure for at least two weeks. 

BMW

With the falling demand for cars and the lockdown of most countries due to the contagion, BMW also earlier made public its plans to close its factories in Europe and Rosslyn (South Africa) effective March 17. It also announced the shutting down of the dealerships in Europe, including other BMW attractions like the BMW Welt and museum. 

Renault

Aside from all its French factories, Renault has also ordered the temporary shutdown of its plants in Novo Mesto (Slovenia), Tangiers and Casablanca (both in Morocco) in response to the virus crisis.

Volkswagen

On March 17, similar announcements were made by Volkswagen, halting operations in their production and auto parts manufacturing facilities for two weeks. The temporary closure will affect car production operations in Germany, Slovakia, Spain, and Portugal, and six components factories in Germany. 

Groupe PSA

On March 16, PSA announced the closure of its manufacturing facilities, including those in Zaragoza (Spain), Opel Rüsselsheim and Eisenach (Germany), Gliwice (Poland), most factories in France, Ellesmere Port and Luton (the UK), and Trnava (Slovakia). 

The suspension will put on hold the production of all PSA-owned brands, affecting models like Peugeot’s e-208 supermini, Citroen’s C4 Cactus, Opel’s Corsa-e, Opel’s Grandland X PHEV version, Vauxhall’s Astra and Vivaro, and more. 

FCA Group

After presenting the Fiat 500e earlier this month, production turns uncertain for the electric mini as Fiat Chrysler Automobiles closes all its plants in Italy and also those in Poland and Serbia. FCA says that it is reducing production due to plummeting demands. This temporary closure will be in effect until March 27. 

Ferrari

The luxury carmaker has also responded to the COVID-19 outbreak by closing its factories for two weeks and granting its workers full pay for the period. In an official statement, Ferrari said that the disruption in the supply chain has made it impossible for them to continue production.

Scuderia Ferrari, the Prancing Horse’s Formula One team, has also suspended all operations for the time being.

Italian performance brakes maker and supplier Brembo S.p.A. made public the temporary closure of its four factories as Italy continues to suffer from the onslaught of the virus. Its shutdown directly affects the operation of its end-users like Ferrari. In the same vein, tyre-maker Pirelli also announced the halt in their operation after a worker tested positive for COVID-19.

Daimler/Mercedes-Benz

A similar shutdown announcement was made by Daimler for many of its facilities in Europe for two weeks, affecting the production of Mercedes-Benz cars, vans and commercials vehicles, and manufacturing of OEM engines and parts for Renault and Nissan. 

Toyota

Citing its principal concern for human safety and recognising the health risks brought by the coronavirus, Toyota Motor Europe announced on March 18, 2020, the shutting down of its various factories in Europe. The plants affected by the suspension of operations are located in Onnaing (France), Burnaston and Deeside (UK), Walbrzych and Jelcz (Poland), Kolin (Czech), and Sakarya (Turkey).

Sales and aftersales will be assessed based on the situation in each country. Retailers are either completely or partially closed with ongoing/continual customer service via telephone or electronic communication.

Nissan

Nissan temporarily seals its British factory in Sunderland and Spanish facilities due to the outbreak and its effect on the delivery of supplies. Employees whose jobs could be performed remotely were urged to do so. 

Ford

Following the series of shutdowns in automotive production plants, Ford has also decided to shutter its operations in Europe effective March 19 for up to ‘several weeks’. 

In a related development, the British government has asked Ford, Honda, Rolls Royce, and other automakers to channel their resources and undertake the production of health equipment like ventilators to help the country in these trying times. 

CHINA: Poised for Recovery?

The Chinese automotive market takes an unprecedented free-fall as demands fell and supplies dwindled with the closing of factories. As reported by the China Association of Automobile Manufacturers (CAAM), the data for wholesale of new cars hit rock bottom by 79% and retail sales plunged by 80% in February 2020 (compared to sales in the same period last year).

China, so far, has been the hardest hit due to massive lockdowns in the country. As the country's COVID-19 case monitor now shows a plateauing and a sort of 'recovery', factories have started humming back, albeit very slowly and cautiously. Dealers and retailers, too, are showing some activity, but showroom traffic is not expected to spring back just yet with consumer spending still very much in crisis levels.

CAAM is hopeful that the auto industry will be able to roll the wheels again by the third quarter of this year although it also forecasts an overall decline in sales for the year. 

NORTH AMERICA: Big Three and Others on Temporary Closure  

At the early stages of the contagion crisis, some US manufacturers have proactively addressed employee concerns and protection in the workplace. The Big Three of the USA (GM, Ford and Fiat Chrysler), together with the United Auto Workers (UAW) formed a joint COVID-19/Coronavirus Task Force to implement protective measures for the safety of employees and human resource.  

With the unabated rate at which the coronavirus swelled, however, the UAW urged for a 2-week lockdown to slow down the spread of infection. A few hours ago, GM, Ford, FCA, Toyota, Honda, and Hyundai (in Alabama) announced factory closures.

The Big Three have earlier resisted UAW’s calls for closure, insisting on the protective measures to combat the virus, but the union prevailed. Earlier, Honda has promptly decided to close its US, Canada and Mexico plants and announced that all its workers get full pay, a move that sets it apart from its colleagues. 

Our Forecast

This issue will be a story-in-progress, one of those rare stories we hope to see ending soon. While we see a cheerless, recession-like future ahead, we are encouraged by the small steps toward recovery that we see in China. Not only for the automobile industry but for the bigger scene. 

We will continue to see further disruption in the auto supply chain, but that, too, will soon stabilise. Manufacturing will start to pick up, albeit in slow-motion mode. 

What we may not see springing back soon, and quite understandably, is the demand and market-side of things. As people struggle back to their feet, the outlook for the dried-up market may not be so bright. Priorities will be realigned, and new cars may not be on people's top lists.

With this drastic loss of demand, automakers may have to cut facility utilisation and production output by as much. We do see initiatives to coax demand. GM is offering 0% financing deals for 7 years, while Ford offers 90-day deferment of the first payment on a new vehicle. Hyundai, too, implements a dealer-relief program and job-loss protection assurance for buyers to help ease down the effects of the crisis.

Like all viruses, even one of pandemic proportion, this coronavirus will eventually find its match. Scientists are on the virus's heels to discover its antidote and to heal the world, including our industry. Wheels will start churning again, and demand will pick up as economies recover. Meantime, the industry puts a lid on manufacturing and spending, closes shop, and weathers the storm. 

By JMSL