Coronavirus: How is it Affecting Automobile Industry

The Coronavirus, COVID-19 was initially discovered in Wuhan, China. With the patient ‘X’ being first reported on 31st December 2019, the outbreak has grown severely over the past few months. So far the virus has affected more than 80 countries with the most affected cases in China, Italy, South Korea, Iran, Japan and most parts of Europe. With the most cases being found in the most developed nations, the global economic sector will be suffering a huge loss.

What do we know about Coronavirus so far?

• Has affected over 1.10 lakh people worldwide with over 3,800 deaths in total.

• Aggressively infectious, not an airborne virus but can be transmitted via droplets.

• So far no vaccination is being available for the disease but it is much less severe than any other Coronavirus outbreaks.

• The death rate varies between 0.7%-3.4% depending on the location and available treatment, which is much less compared to MERS(30%) and SARS(10%).

• Older generation is much at risk compared to children or the younger generation. 60+ and older should be taking extra caution in terms of health. 

• COVID-19 seems to prefer individuals with already lower immune system.

The Global Economic Sector Scenario:

China is one of the biggest markets for most of the businesses. With China taking the biggest hit, the already suffering global economic sector is expected to degrade even further. The global pandemic of covid-19 may also result in one of the worst recession worldwide.

• The travel sector is taking a huge hit because of the ongoing Coronavirus.

• The Coronavirus is majorly affecting the largest businesses around the world.

• The policy sector will be taking a huge hit as well.

Effect on the Global Automobile Industry:

China being one of the biggest auto part manufacturers around the world, the automobile sector will be facing one of its worst crises as shortage in supplies from China will stall production around the world. China being the largest automobile market, the drop in sales has been a huge setback for the international brands.

China is the biggest car market in the world and with Wuhan being the ‘motor city’, is also at the center of the outbreak. Wuhan is home to auto plants such as General Motors, Honda, Nissan, Peugeot Group and Renault. Wuhan is responsible for about 10% of total car manufacturing in the country.

• In China, Car sales fell 92% in the first half of February.

• The motor city Wuhan, is facing the worst crisis with factories being closed down.

• The shortage of supplies from China will stall the production worldwide. 

• Companies like Hyundai and Kia has recently stopped several production lines in Korea and Nissan has introduced suspension in production in Japan.

Indian Automobile Industry:

• With 40 confirmed cases in the country, the Indian automotive sector will be taking another huge hit after the automotive market slowdown a few months ago.

• China is responsible for a total of 27% automotive component imports to India every year. This has been compromised due to the heavily infectious Coronavirus.

• Since the deadline for bs6 is approaching soon enough, with the lack of components, India may face some supply shortages.

• The vehicle production in India is expected to decline 8.3% due to the shortage.

The Aftermath:

In terms of the auto-sector, there is little good news.

• Almost all suppliers in China have started the production at a lower capacity.

• Indian Companies like Maruti-Suzuki, Tata and other carmakers will not be affecting much since their supply chain has not been compromised because of China.

• Supply disruption may lead companies to source the products locally which can boost the local auto components sector.

With just 40 confirmed cases and no deaths so far, India is still in good shape. With a lot of Indian automakers being self-sustained, the auto-industry in India is not expected to have the worst case scenario. With China still struggling with COVID-19, India might draw attention to fill out component supply shortage globally.

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