The outbreak of the coronavirus, also known as COVID-19, has had devastating effects all around the world with over 250,000 people infected and thousands of fatalities. It has led to a bloodbath in the stock markets and even halted the global auto industry.
At the time of writing, over 453 cases of COVID-19 had been confirmed in Pakistan. Previously, we talked about how you can use certain preventive measures. Now we will be talking about the impact this will have on the local as well as the global auto market.
Originally, the virus had impacted the auto supplies from China but as the virus has spread across the globe, we have seen automakers in Europe and Asia getting impacted by this.
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Local Industry
For now, the impact on the local industry has gone under the radar but we can assume that we will be seeing visible effects soon. Recently, Toyota took the commendable step of postponing the official launch of the new Toyota Yaris due to the outbreak. While this is good it also begs the question is the local industry ready?
We mean that they have boasted about localization with regards to the parts but a big portion is imported and if the production of those parts is halted, how will they keep the manufacturing rolling?
The other question that arises from the outbreak is that we are headed towards a recession and with the sales already down, coupled with piling up inventory; carmakers have observed Non-Production Days. How will the car makers navigate through this without letting go of some of their workers.
Lastly, they might have to observe further Non-Production Days because as the outbreak worsens in the country they might have to stop production altogether to help prevent the spread of the disease. This could have devastating consequences for the national economy, the local industry and the people.
Pakistan’s auto industry was showing signs of promise with the launch of the Yaris, Hyundai’s Tucson and the Prince Pearl. Hopefully, the sector will be able to navigate through this.
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Global Industry
This one is slightly trickier to predict because a lot of automakers have global supply chains and they have set up shops in various countries. When the virus spread across China, we saw that multiple car companies had to stop their operations including Honda, GM, Nissan and even Tesla, which had recently established their plant in Shanghai.
A few weeks later, Hyundai had to observe Non-Production days because the plant in South Korea had run out of the wiring harness and faced losses of $500 million.
Now, while the plants are up and running in China, the virus has shifted to Europe where Fiat Chrysler have closed multiple plants and with Germany going into lockdown, we will see German brands getting impacted as well.
There were already reports that the global markets are facing a decline in sales which is impacting their profits; Nissan for the first time in over a decade reported a quarterly loss. They even slashed their predictions for this year even before the virus fully hit. The global industry is facing the same issues as their counterparts in Pakistan but on a much larger scale, simply because of the size of their operations and the global supply chain.
At the same time, it makes it easier for them to navigate through the issues because of these very reasons. The companies have diversified their supply chains because they didn’t want to rely on just one source and it still did not work for Hyundai which saw all three suppliers of the harness close down due to the virus.
On the other hand, as the virus slows down in China, the European carmakers can increase the supply from there even with the plants in Europe closed.
We live in interesting times and we will be keeping a close look on how events unfold.
What do you think? Let us know in the comments below.
