Just as China’s auto plants are recovering from shutdowns caused by the coronavirus outbreak, they are facing a new headache: potential parts shortages.
The virus is now causing production disruptions in Europe, North America and Japan, which supply crucial components to automakers in China, the industry’s biggest market. Those at risk range from global automakers such as Tesla Inc. and BMW Group to local producers including Guangzhou Automobile Group Co. and Zhejiang Geely Holding Group Co., all of whom could face disruptions if the pandemic drags on.
Those fears are a reminder that economic activity in any given country is unlikely to return to normal until the outbreak is brought under control worldwide. With auto-making suspended in Europe and the Americas, glitches in China could affect the only major manufacturing region where plants are ramping up, threatening to set back the recovery of the world’s second-largest economy from a months-long paralysis.
“About two months ago, people were asking how the disruption in Chinese
supply chain would impact the global auto industry,” said Stephen Dyer, Managing Director of consultancy AlixPartners. “Now it’s the reverse.”
China imported $36.7 billion of vehicle components last year, with Germany, Japan and South Korea representing 28 percent, 27 percent and 6 percent of the total, respectively, according to the China Automotive Technology and Research Center, a state-backed think tank. The U.S. ranked fourth, accounting for 5.9 percent.
Billionaire Li Shufu’s Geely, the top maker of Chinese-brand vehicles and owner of Volvo Cars, said a potential shortage of imported components has had a minor impact on production. That has prompted the company to seek to switch to Chinese suppliers.
Guangzhou Auto, whose partners include Toyota Motor Corp. and Fiat Chrysler Automobiles NV, said it is taking steps to ensure supply as the company imports as much as 10% of its components from overseas to assemble them in China.
While existing inventory offers some cushion, time is running out. Automakers in China typically carry about eight weeks’ supply of imported parts such as engines and chips, though for some components that can be as little as four weeks, said Xu Haidong, a vice chief engineer at the China Association of Automobile Manufacturers.
Many electronic parts in particular are imported from overseas, leaving makers of higher-end vehicles that contain a lot of software and computers vulnerable.