With China slowly re-opening manufacturing plants following COVID-19, businesses across the automotive supply chain are beginning to breathe a sigh of relief. But what effect has the outbreak of COVID-19 had on the car manufacturing industry?

With most car manufacturers looking to China to supply parts as a way of cutting production costs, Chinese manufacturers now export $34 billion worth of motor parts each year.

However, this reliance on China has caused the industry to grind to a halt during COVID-19, with many manufacturers unable to get their hands on parts needed to keep operations running.

Electric vehicle makers have been particularly caught out, with a bulk of the lithium-ion batteries built annually coming from China, while car makers including Fiat Chrysler Automobiles and Volvo were forced to close plants while they waited for parts to become available.

Production delays for parts now sit at 90 days, with the number expected to grow even further depending on how successfully the virus is contained and eliminated.

With so much certainty around when manufacturing and supply chains will be back up and running to handle demand, many of the globes largest car makers are being forced to delay or cancel new models and prioritise their bestselling, most profitable models.

Car makers are also struggling with the closure of international borders, which has caused the global economy to free fall to depths rarely seen and making it difficult for consumers to condone the purchase of a new vehicle.

Considering COVID-19 showcasing the reliance many car makers have on China, efforts are already underway to reduce this reliance in preparation for the next global crisis.

Japan has announced that they will offer money to Japanese companies to move their manufacturing operations out of China, while several electric vehicle makers are preparing their own secure pipeline of batteries.

But with Chinese manufacturing rumbling back to life, it remains to be seen how many businesses are prepared to follow through and reduce their reliance on China in exchange for higher production costs.

Source: Bestsellingcarsblog | Media post: How the Coronavirus is Impacting the Car Manufacturing Industry

27 April 2020