With more than 4,000 people in China now infected by the coronavirus and more than 100 dead, Chinese authorities are taking major steps in a bid to halt the spread of the disease, among other things limiting travel and shutting down some schools and factories where the virus could be passed around.
The crisis is expected to have a significant impact on the auto industry, in part because the coronavirus outbreak is centered in Wuhan, the capital city of Hubei province. It’s not only one of China’s largest cities but also the second-largest center of automotive production in the country.
“It is hard to measure the direct impact today because we are in the middle of the Chinese New Year when all plants would basically be idle anyway this week,” Michael Dunne, chief analyst with China-based consulting firm ZoZoGo told TheDetroitBureau.com. “Next week is when the drop off in production numbers will begin to show up.”
But Dunne believes the impact of the virus will be substantial, especially if factories remain closed in Wuhan for more than a short period – and the Beijing government has already announced the region will be under quarantine for at least several weeks.
Wuhan serves as a major production base for foreign brands Nissan, Kia, PSA and Honda. Nissan produces about 1.5 million cars a year in the city, Honda about 700,000. A number of indigenous Chinese automakers, such as Nissan partner Dongfeng, also operate in and around Wuhan.
While Hubei is considered Ground Zero for the coronavirus epidemic – which appears to have emerged from a livestock market in the city – the disease has been spreading across the country and beyond. Other regions of China have been moving to take their own precautions.
Shanghai, with a population of nearly 25 million, is extending the traditional Chinese New Year holiday shutdown, which began last weekend, from Feb. 1 to the 10th, all but completely closing down schools, factories and offices.
Shanghai is the largest automotive production hub, in the world’s largest auto-producing nation, so, even an additional week shutting down auto plants there could be measured in the loss of more than 100,000 vehicles, according to industry data.
The health crisis is impacting automakers in other ways. Toyota has implemented a ban on employee travel to China “until further notice.” Rival Honda is going a step further, evacuating about 30 Japanese employees and family members and returning them home.
Several other foreign-owned manufacturers are considering similar steps. GM said it will “monitor” the situation. While it has put in place a ban on travel to China it has not yet decided whether to evacuate any employees there. As one of the largest foreign carmakers in the country, it employs a large force of non-nationals, including Americans.
The situation is fluid, industry representatives stressed, and how manufacturers are likely to act will depend on a variety of factors, including data showing whether the coronavirus epidemic is being brought under control or, conversely, if it appears to be spreading beyond a handful of incidents outside Hubei province.
Ford, for one, expects to restart its factories in China Feb. 3, the traditional end of the New Year’s holiday. But a spokesman said that it could extend its shutdown if conditions warrant.
The epidemic comes along at a particularly bad time for the Chinese auto industry. Once an automotive backwater, the country has grown to become the largest car market in the world. But, after two decades of double-digit growth, demand declined last year and it was already uncertain whether the market would recover in 2020.