Toyota’s big plant in Guangzhou reopened today, a significant development in China’s battle to overcome the coronavirus pandemic.
By the end of January, as it became clear an epidemic was underway in the province of Hubei, automotive assembly and parts plants quickly closed, even as the country’s new vehicle sales collapsed. Shortages of Chinese-made parts began to be felt worldwide, Hyundai soon idling some of its own assembly plants because of their dependence on parts imports.
Now, Chinese authorities claim, things are getting back to normal as plants like Toyota’s Guangzhou line reopen. But there is serious concern that the Chinese are overstating the turnaround – perhaps intentionally to make it look like its efforts to contain the coronavirus are working.
(Plants close as virus spreads in Europe and U.S.)
“There could be examples of exaggerating production ramps,” cautioned Michael Dunne, founder of ZoZoGo, an Asian automotive consulting service. “That is nothing new,” he added, noting that “Companies are definitely being encouraged to get back to work.”
Some recent reports from China have indicated as few as 20 to 30% of workers at key automotive plants actually are showing up. As a result, production is running far below normal levels – if the factories actually can start up at all.
The Associated Press over the weekend reported that authorities in China have encouraged factory managers to leave their lights on and machinery idling so the demand on energy would suggest that things are getting back to normal.
While some of those moves appear to be happening at local levels, pressure appears to be coming from the top, according to the Singapore-based English language newspaper, Strait Times.
“We’ve achieved important interim results,” declared Chinese President Xi Jinping last Tuesday during a visit to Wuhan, the epicenter of the coronavirus outbreak. Analysts have suggested the pandemic poses an existential threat to Xi and even the Chinese communist party, so appearing to quickly bring things under control is critical for them, whether or not things really are getting better.
(UAW, Detroit automakers set up coronavirus task force.)
“Businesses have been under intense pressure … to reopen,” said a report in the Monday edition of the Strait Times. But that can be difficult, it added, especially for plants dependent on more than 50 million migrant workers, many of whom remain in quarantine, others stuck without transportation because of cuts in bus service.
General Motors is among the companies pushing to reopen car plants where possible. But GM and other automakers face a separate problem. Last month, car sales in the world’s largest automotive market plunged by 80% and it is unclear just how quickly demand will recover.
“Dealers are sitting on record inventories,” said analyst Dunne, “so the market pull for production is just not there.”
That said, there’s plenty of pull for Chinese auto parts plants supplying overseas clients. If anything, the situation is expected to get worse in the short-term, according to an advisory issued last Friday by J.D. Power. As happened with Hyundai’s Korean operations, increasing shortages of Chinese-made components could impact assembly operations in the U.S., perhaps within the next week or two, the research firm warned.
On top of that, vehicle owners could feel the impact directly, especially if they need service or repairs relying on the many parts imported from China – anything from windshield wipers to replacement body panels.
(China new car sales drop 80% in February.)
“There’s no telling how widespread or long lasting the ripple effect of the coronavirus will be for the automotive industry,” said Chris Sutton, a vice president with J.D. Power.