Corona Impact on Auto Sector

Corona-virus damage on Auto Industries shifting from Supply to Demand12 min read

Amid suffering from the hinder the supply chain to keep production going after the coronavirus outbreak shuttered auto components plants across China. A bigger fear of the Automotive industries across the globe is emerging: “Consumers may be in no mood to buy cars and trucks”.

Now there are 100,000 such cases across the globe and it is increasing one new case daily in US cities. Industrial sales analysts are paring back their expectations for the next year of near-17 million sales of vehicles in the U.S.

LMC Automotive cut its 2020 estimate by 300,000 units to 16.5 million, which would be the lowest for the industry since 2014. Worldwide, the researcher cut 3.5 million units from its forecast, more than half of which was attributed to China.

As the epidemic that emerged from China has become a pandemic that could wipe as much as $2.7 trillion from the global gross domestic product, governments are taking increasingly aggressive action to contain the virus. Governments are taking increasingly aggressive action to contain the virus. Italy and India have announced travel restrictions for about a quarter of the population concentrated in its most productive northern regions, while U.S. President Donald Trump’s administration is drafting measures to blunt the economic fallout.

Kristin Dziczek, vice president of the labor and economics group at the Center for Automotive Research said:

“The real fear and concern is if we end up with a demand crunch in the U.S.”

Cox analysts wrote on March 3.

“The seasonally adjusted annualized rate of vehicle sales was about 16.8 million in February, according to Cox Automotive, surpassing its 16.6 million estimates. However, the “real test” will be in March, as the stock market decline and uncertainty about the virus “are bound to have some impact on vehicle sales”

German parts maker Continental AG last week blamed the coronavirus outbreak for a cut to its full-year earnings guidance. Some of the biggest components manufacturers already are signaling trouble is ahead for the industry. A major supplier, Aptiv Plc, of automotive software and wire harnesses, Aptiv Plc, trimmed its first-quarter income estimates for the same reason.

The Manufacturers of Auto Vehicle are racing to keep production lines running as virus fears threaten to crimp supplies of key parts. But if car buyers steer clear of showrooms — either out of fear of being infected or concern about their personal finances — that could have a more lasting negative impact.

Michael Dunne, chief executive officer of consultant ZoZo Go, in a newsletter referring to the approximately 80% sales plunge the world’s biggest market saw last month said:

“People aren’t thinking about big-ticket items. As China has proven demand can go to nothing in a hurry,”

Alex Calderone, managing director at the financial advisory firm spent last week canvassing his auto-supplier clients to gauge the risk of production hurdle because of Supply. The Client Reassured him by their logistical expertise, Now he is less concerned about supply-chain risks than of what the virus could mean for consumer sentiment.

Calderon said:

“If there’s going to be an economic shock that roils the auto industry, it’s going to come from changes to consumer psychology and confidence and spending patterns. It’s the social-distancing measures that have the potential to be the most dangerous to the economy.”

Over the last few days, vehicle assembly plant shutdowns and impacted daily production rates in direct response to the containment directives of national and provincial governments and measures taken by individual OEMs. General Motors identified a potential parts shortage and airlifted supplies for its North American truck production, according to United Auto Workers officials.

Fiat Chrysler has said it is seeking alternative suppliers. Others Auto suppliers Dana and Aptiv have established teams to closely monitor the COVID-19 epidemic.

 

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