China Auto Sales Could Drop 10% In First Half Of 2020 Says Industry Group

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iting the impact of the coronavirus epidemic, China’s largest auto manufacturing group warned on Friday that new vehicle sales could fall more than 10% in the first six months of 2020 and by about 5% for the full year, Reuters reported Friday.

And that is only if the epidemic is contained before April, according to Fu Bingfeng, executive vice chairman of the China Association of Automobile Manufacturers. Fu’s latest outlook was more pessimistic than a month ago when CAAM estimated sales would drop about 2% this year.

The latest forecast was based on the association’s survey of hundreds of its members, including vehicle assemblers, suppliers and other companies in the industry.

So far, the disease has killed more than 1,380 people and infected about 64,000 on the Chinese mainland. Factories are shutting down, at least temporarily, disrupting supply chains across the world.

Volkswagen and General Motors are the largest western-based manufacturers in the world’s largest auto market, where more than 25 million new vehicles were sold in 2019. But the virus is a problem across the industry, affecting major domestic manufacturers such as Zhejiang Geely Holding Group and SAIC Motor Corp.

Tesla is beginning production at a new $2 billion plant near Shanghai.

Earlier this week Hyundai said one of its largest suppliers, Kyungshin, which supplies about half of all wiring harnesses for Hyundai’s South Korea assembly plants, said only half of the 600 workers at its Jiangsu plant in China returned to work after the extended break for the Chinese New Year. Hundred of workers didn’t report to another plan in Qingdao.

Reuters reported that Hyundai plans to use airplanes to fly parts to its South Korean plants.

After reporting its 2019 earnings plummeted to 19 million euros from 3.4 billion euros in 2018, Renault said it is reviewing all of its Chinese operations and will consider closing plants to cut costs, according to acting Chief Executive Officer Clotilde Delbos.

The French automaker has halted production at a plant in Wuhan where the coronavirus initially broke out. The company said other plants in China may reopen and close in coming weeks if there are more supply chain disruptions.

General Motors CEO Mary Barra told Automotive News that her purchasing and engineering teams “are working around the clock to develop and execute contingency plans, and we are doing everything possible to mitigate the impact of the virus.”

Fiat Chrysler Automobiles CEO Mike Manley told the Financial Times that four of its Chinese suppliers have been affected by the coronavirus, and the situation could force production to stop at an FCA plant in Europe in two to four weeks.

Last week, Standard and Poor’s, the credit rating agency, released a report that found Volkswagen has the greatest exposure to China with 23 assembly and component plants, accounting for 40% of its global production.

“Among suppliers, we think Robert Bosch will be particularly hard hit,” the S&P report found. “With about 14 billion euros in annual sales from China, China is Bosch’s second-largest market after Germany.”

Bosch makes multimedia infotainment systems, brake booster system and electronics for electric cars in China. In late January, Bosch CEO Volkmar Denner said the company had not experienced any problems with suppliers.

“We need to wait to see how things develop,” Denner said. “If this situation continues, supply chains will be disrupted. There are forecasts that predict the peak for infections will drag on until February or March.”

New auto sales in China dropped 8.2% last year before the epidemic, according to data from CAAM. The association said sales in January probably fell 18% from a year earlier, based on preliminary data.