Huge Loss To Many JV Car Makers by Work delay and Suspend Production in Hubei China Due to NCoV


Hubei, one of China’s four largest automobile production provinces and passenger car bases in the country has resumed work delays in the light of the Novel Corona Virus epidemic which traces its roots in its capital, Wuhan. The province, which is the base of local car makers such as Dongfeng Motor Group as well as a number of JV car brands from the United States, Japan, France, and Britain, produced 2.24 million vehicles in 2019, accounting for 8.8% of the country’s total automobile production.

All car companies and parts manufacturers in the province are severely affected by the notice issued by the Hubei Provincial Novel Coronary Virus Infection Pneumonia Prevention and Control Headquarters stating that businesses in the province will not start to work as earlier as March 10..

Various car companies postpone work resumption

Three vehicle plants of Dongfeng Honda located in Wuhan continue to be shut down following three postponements for work resumption on February 24. The current situation in the province has put the scheduled March 10 resumption of work date in question.

Two of the three vehicle plants have a total annual production capacity of 512,000 units. The third plant, which only started production in 2019, has a capacity of 120,000 units. The latter has also met the conditions for new energy vehicle production. Dongfeng Honda sales reached 788,916 vehicles last year.

In January 2020, the company sold 73,597 vehicles vs. 60,691 in January of last year, a 21.3% year-to-year increase. It was the largest increase industry-wide as the company was the only one to register more than 20% increase. Dongfeng Honda’s two main sales models, the Civic and CR-V are in short supply. 22,051 Civic cars were purchased in January, up 14.4% year-to-year while 22,332 units of CR-V were sold, a 42.1% increase. It is expected that the shutdown will affect the manufacturing and availability of newer models such as its mid-size Honda CR-V facelift and plug-in hybrid, Civic hatchback.

The epidemic has also affected other local and JV car manufacturers. Among local car makers, Shenlong Automobile (Dongfeng Peugeot Citroen Automobile) is heavily affected as it has four production bases in Wuhan. Dongfeng Citroen, Peugeot, and Renault plants are also feeling the pinch. Even Chinese joint venture giant, SAIC-GM, which has a plant that includes a three-cylinder engine production line in Wuhan, is feeling the effects of the epidemic.

Global “crisis” of outages of auto parts

Aside from vehicle manufacturers, Hubei also plays host to key auto parts suppliers for car companies worldwide. With half of the world’s top 20 automobile parts suppliers including Bosch, ZF, and Valeo located in Wuhan, the work delays are causing a profound effect on global automobile production.

Elsewhere in the world, other car makers are also feeling the widespread effects of the epidemic. In Korea, Hyundai’s Ulsan Plants No. 1 and 2 as well as its Asan Plant have either partially shutdown. Kia Motors has already extended the shutdowns of its plants in Gwangmyeong and Gwangju.

Some car companies have resorted to stop-gap measures just to maintain supply. Jaguar Land Rover shipped Chinese-made parts in suitcases to the UK to maintain production. Fiat Chrysler has expressed that parts supply is very tight and on the verge of discontinuing of production.

Nissan has closed some production lines in Kyushu as well as suspended operations in its other factories in Japan, stopping production in Malaysia. The company is contemplating on further stopping production in its other plant locations in the US, Mexico, Britain, Spain, Russia and India should the epidemic situation worsen.

There is no doubt, the shutdowns and reduced production levels of the car manufacturers in Hubei is already having a great impact on the global automotive industry. With January sales either flat or in decline, the outlook on car sales in February and March looks even bleaker in China.