Fleet News

Coronavirus: Manufacturers assessing Covid-19 impact

car production line

Manufacturers insist that lead times and the availability of parts for the aftermarket are not being impacted by the spread of coronavirus (Covid-19).

However, with the number of people contracting the illness growing globally each day, some have suggested parts shortages cannot be ruled out longer term.

Hubei province in China – the centre of the outbreak – is a major hub for vehicle parts production and shipments.

In 2019, China exported car parts to a value of more than $60 billion, (£47bn) according to customs data.

Dr Ralph Speth, CEO of Jaguar Land Rover (JLR), which produces almost 400,000 vehicles per year at its three factories in the UK, told attendees at the opening of the National Automotive Innovation Centre in Coventry the supply of parts was a concern.

“This is an issue for the complete car automotive industry,” he said. “We don’t know how long it will take before the supply chain comes on stream again in China.”

A JLR spokesman told Fleet News: “While we cannot rule out the possibility of parts shortages impacting production the longer the disruption continues, we do not currently expect to stop production in our plants as a result of parts shortages.”

Nissan said it had restarted operations in three of its plants in China, but at this time, the restart timing of Xiangyang Plant (Hubei Province) and Zhengzhou Plant (Henan Province) had not been determined.

The spokesman added: “In Japan, we are planning or have carried out temporary production adjustments at certain plants. There has been no impact on our plants outside China.”

Toyota says it is investigating the impact, with parts also produced by Chinese suppliers, but stressed at this stage it did expect an impact on the availability of product in the UK.

Mercedes-Benz told Fleet News that it gradually started production in China last month and all of its other plants were running as planned.

“Currently the supply is secured,” a spokesman said. “Possible effects depend on the development of the general corona situation, as suppliers, transport logistics, etc. are also affected by the government regulations in China.”

Meanwhile, Fiat Chrysler Automobiles (FCA), BMW, Kia, Vauxhall, and the Volkswagen Group, including Audi, Škoda and Seat, all said they were closely monitoring the situation.

The World Health Organisation (WHO) has said that the world is in “uncharted territory” on the coronavirus outbreak, while the Organisation for Economic Cooperation and Development (OECD) has warned the global economy could grow at its slowest rate since 2009.

The think tank has forecast growth of just 2.4% in 2020, down from 2.9% in November. But it said a longer “more intensive” outbreak could halve growth to 1.5%.

The forecast came after the Bank of England vowed to help stabilise markets, which suffered steep losses at the end of February.

Coronavirus is already forcing businesses to suspend operations in China and elsewhere as officials try to contain its spread.

The OECD forecasts the global economy could recover to 3.3% growth in 2021, assuming the epidemic peaks in China in the first quarter of this year and other outbreaks prove mild and contained. But it said the picture would be much worse if the virus spread throughout Asia, Europe and North America.

David Leggett, automotive editor at analytics firm GlobalData, said: “With a typical car containing 20,000 parts, some Chinese-sourced content in every car is a given.

“Procurement managers at the car companies will be struggling to get visibility on where the critical supply-chain pinch points are – both in terms of what they directly source and also what comes in from tier one suppliers in the form of sub-assemblies and their sourcing difficulties further down the supply-chain.”

Leggett added that carmakers will look at options such as switching to alternative supply sources, but for some critical parts that may be very difficult to do in the short-term – thus halting production when supply dries up.

“All they can do is closely monitor the situation and look at risk mitigation measures where they can,” he said.

“Buffer stocks to ride out supply disruptions will be limited due to the predominance of ‘just-in-time’ lean manufacturing processes that keep inventory levels low.”

For the latest from Fleet News on this developing story click here.

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Related content

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee