The impact of the coronavirus on the auto industry is on the cusp of accelerating, according to a Center for Automotive Research presentation today.
In the past 20 years, automakers and suppliers expanded their operations in China, with the intent of exporting to other markets. The auto industry has become reliant on imports from China as well as selling vehicles in that country.
The coronavirus, which began in China, has forced cuts in output in that country. Chinese factories are struggling to restart operations.
“This is a very layered and intricate supply chain,” Kristin Dziczek, a vice president of CAR, said during the presentation. CAR is based in Ann Arbor, Mich.
“As the virus spreads, we’re going to see further disruptions,” she added.
Parts inventories from China were increased “prior to Lunar New Year,” the CAR vice president said. “We’re drawing down that inventory.”
Hyundai Motor Co., General Motors Co. and Honda Motor Co. have already reported problems with imports from China. GM, Volkswagen AG and Nissan Motor Co. are automakers that rely on vehicle sales in China.
The coronavirus now is spreading to other regions.
“There’s going to be some pain associated with this disruption,” said Michael Dunne, CEO of ZoZo Go, an automotive consulting firm, who spoke during the presentation. “We haven’t seen anything like this before.”
In the long run, the industry is likely to develop new operations to lessen its dependency on China, Dunne said.
“Look for automakers and suppliers to very quickly develop those plan Bs,” he said.