When the world’s biggest manufacturing hub is hit by a fast-spreading pandemic, it has far-reaching consequences
The Coronavirus outbreak in China was reported at the very end of 2019 and has since spread from its epicentre in the Wuhan district to almost all the continents except Antarctica. The various quarantines and lock-downs initiated during this period to limit the spread of this new disease have had dire and wide-ranging economic consequences, which have affected the auto industry as well.
In China alone, domestic sales in the first half of February 2020 fell by a whopping 92 per cent as compared to the same period in 2019. Since people were staying indoors during the quarantine period to avoid infection, barely anyone bought any cars. Almost every brand in the world sources some parts from China-based manufacturers and with factories being shut down or operating at lower capacity, they are scrambling to combat the supply disruption. Even automotive events like the Geneva Motor Show have been cancelled over the fear of contamination in a large gathering of internationals.
While some automotive brands in Europe are looking at possible shutdowns as the supply of parts remains affected, the Indian auto industry is also feeling the impact of the outbreak. A recent statement from the Association of Indian Forging Industry (AIFI) mentions that Chinese manufacturing accounts for 27 per cent of India’s car component imports. Consequently, the AIFI projects a decline of 8.3 per cent in annual vehicle demand.
Commenting on the supply chain disruption from Chinese manufacturing facilities, the President of AIFI, S Muralishankar, said, “The problem is further aggravated by the Chinese government’s suspension of shipments by sea until further notice and allowing air-only shipments that are not suitable for auto components and forging industries, therefore the Indian OEMs are unable to plan production beyond the inventory as currently available to them.”
Given the recent and somewhat ongoing auto industry downturn in India, the adverse effects of the Coronavirus outbreak could plunge it into a steeper decline. If the virus continues to spread with no stable solution beyond the first quarter of 2020, companies may decide to lay off chunks of their workforce to manage costs during the low production period.
The disease caused by Coronavirus has since been given a more specific title, COVID-19. Government health organisations are constantly working to combat its spread and develop treatment plans. Even though certain Chinese manufacturing facilities are back in action, the long-term impacts of the break in the supply chain will be felt for a prolonged period in 2020.