How coronavirus is impacting the automotive industry

Forget toilet paper, maybe it’s time to stock up on car parts.

The coronavirus (COVID-19) has had widespread implications for industries across the world and is now set to put the brakes on the automotive sector.

Hyundai predicts about half its cars destined for Australia in the coming months will be delayed by Chinese parts shortages caused by shutdowns related to COVID-19.

The South Korean manufacturer, which is Australia’s third-largest brand, relies heavily on parts made in China. Sister company Kia is also understood to be experiencing delays.

The availability of Chinese parts has also hit a range of other car manufacturers including European brands Mercedes-Benz, BMW, Audi and American manufacturers General Motors, Ford and Chrysler.

Nissan was forced to halt production for two days at a plant in Japan which makes the Serena and X-Trail models following part shortages in China.

RACQ Principal Technical Researcher Russell Manning said when China shuts down everything else grinds to a halt as well.

“China is the biggest manufacturer of electronic components in the world and manufacturers have outsourced production of sub-assemblies to China due to cheaper production costs,” Mr Manning said.

“We are already starting to see European car manufacturers run out of electronics so they will begin to shut down.

“The US is also concerned about where they are getting parts from and Japan has had some exposure as well.”

Mr Manning said it was still unknown how much of an impact COVID-19 would have on the global automotive market.

“It’s very early days and nobody really knows, but I think it’s safe to say the more it spreads, the more disruption we’ll see,” he said.

“The industry has experienced long-term delays before when the Fukushima nuclear disaster and tsunami affected Japanese production, but coronavirus could be a much bigger disruption as it has the potential to become a global issue.”

Mr Manning said any disruption would likely cause delays in the new car market. 

“Anybody buying a new car may end up having its delivery delayed if parts are in short supply or there is no one to build them,” he said.

“Instead of ordering something that would usually take a couple of months to deliver, it might push out longer. We certainly saw it happen with some models after the Japanese tsunami. 

“It’s worrying to see as car sales globally are down and this could depress the market even further.”

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Mr Manning said the other thing to consider was part stocks for insurers and repairers.

“We have reasonable part stock in Australia for imported models, however, some car companies hold their main part stocks offshore, often in Asia, which will slow things down further,” he said.

“You may see imports to replenish onshore parts slow down as well.

“If they don’t have the required parts in stock, you can expect delays in repairing vehicles, and that will impact on everyone concerned.

“The last thing a repairer wants is to have a workshop full of cars waiting for parts.”  

Mr Manning said the important thing for car owners and prospective buyers to remember was not to panic.

“The industry will roll through this as it has with all major disruptions previously,” he said.