Covid-19’s impact on China’s automotive industry

The Chinese market is not only the world’s largest automotive market, but also an important part of the global automotive supply chain. Wuhan, the capital city of Hubei province and the epicenter of the outbreak, is home to several big automotive companies and suppliers. According to the China Passenger Car Association, the output of passenger cars in Hubei Province reached 2.24 million units in 2019, accounting for about 10% of total national output. Additionally, there are over 12,000 auto parts companies in Hubei province, accounting for 13% of the country ’s total.

Both sales and production within the Chinese automotive industry have been severely affected by the outbreak of coronavirus. In February, China's auto production and sales declined sharply, with auto production and sales of 285,000 and 310,000 units respectively, down 83.9% month-on-month and 79.8% and 79.1% year-on-year. According to the China Association of Automobile Manufacturers (CAAM), although the pandemic is becoming more controlled, the production and sales is expected to drop 45% in the first quarter and 25% in the first half year compared to year-on-year figures. It is believed the delayed car purchases caused by the pandemic will recover in the second quarter when the situation eases. There will also be opportunities in the short term as the health car concept gains momentum. Interior air filtration and purification systems, accessories such as antibacterial seat covers, and steering wheel covers will also see potential to grow.

The global supply of auto parts is also being seriously hit by the COVID-19 pandemic. As a result of a shortage in parts, factories in other countries in Asia have been forced to shut down or reduce output, this includes Nissan in Japan, and Hyundai and Ssangyong in South Korea. This situation has slowly been recovering and is improving as OEMs and suppliers outside of Hubei province have gradually resumed production and business activities. According to a survey by CAAM in mid-March, 90% out of the 300 interviewed companies had already resumed production and 80% of the workers had returned to work. Companies in Hubei province are expected to resume production soon. However, due to the shortage of raw materials and workers as well as logistics disruption, it will take some time for the industry to recover to normal levels. Since OEMs and part suppliers are focusing on the recovery work and there are restrictions on travelling and meetings, the cooperation for new technologies has seen slower progress. Ongoing dialogues between Swedish companies and their Chinese counterparts are also affected and will take time to rebuild in the short-term.

Source: CAAM, China Passenger Car Association