Coronavirus-related supply chain risk easing for China carmakers

Source: Xinhua | 2020-03-29

The orderly resumption of industrial production and a recovery in transportation capacity has eased the risk of sustained automobile supply-chain disruption in China, according to a report from Fitch Ratings.

"We expect coronavirus-related disruption to automobile and parts production to be largely resolved by mid-April, although the global outbreak of the virus could cause supply shortages of certain imported parts, particularly for joint ventures that produce premium and high-end cars," the report noted.

Chinese regulators have prioritized production recovery for the automobile industry, among other long-value-chain industries, and urged local governments to gradually remove administrative barriers for plant reopenings while maintaining strict protocols for epidemic control.

Citing data from China Association of Automobile Manufacturers, the report said 90 percent of China's 23 largest auto groups had resumed work as of March 11.

But lagged recovery in production and logistics in the hardest-hit Hubei province will still cause short-term supply-chain disruption, the ratings agency added.

Meanwhile, the continued outbreak around the world could interrupt the supply-chains of some Chinese automakers over the next few months, but overall risks remain manageable in light of China's complete auto-supply chain and small exposure to auto-part imports, said the report.

China's passenger vehicle sales dropped sharply in February, with retail sales plunging 78.5 percent year on year to 252,000 units, according to the China Passenger Car Association.

Fitch expects a sharp recovery in car demand in the second half of the year, driven by consumers' rising desire for private mobility and consumption-stimulus policies. But it is unclear how a prolonged global slowdown will affect consumer behavior in China, the agency added.