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The Independent Automotive Aftermarket Federation

Production stoppages at China factories lead to worldwide shortages in components as coronavirus outbreak spreads

Date: 06-Feb-2020

The global car industry is facing a stress test as the coronavirus outbreak in China disrupts the supply of components from transmissions to steering systems.

Parts manufacturers across China have suspended production for this week and, in the case of Hubei province, the epicentre of the outbreak, factories will remain shut until 13 February or later. This leaves car plants in both China – the world’s largest market – and beyond at risk.  On Tuesday of this week Hyundai became the first global carmaker to halt production outside China because of component shortages caused by restrictions put in place as a result of the virus.

Wuhan, the capital of Hubei province, is one of the top auto-industry hubs in China, alongside Shanghai, Guangzhou and Chanchun, where global manufacturers make both cars and components in conjunction with partner companies.

Hundreds of suppliers have factories in Hubei, including more than half of the top 20 global parts makers, with Robert Bosch, Valeo and ZF Friedrichshafen among those producing components there, according to the China Automotive Technology & Research Centre.

“Carmakers will face severe parts supply issues, something that wasn't encountered during the SARS outbreak,” said Cui Dongshu, secretary general of China’s Passenger Car Association, referring to the 2003 incident. “Wuhan is the most cost competitive among China’s car industry hubs, therefore many component manufacturers produce components there and supply their clients around the world.”

General Motors, Volkswagen and Toyota Motor are among companies that have closed China plants up to at least February 9, following information issued by several provinces advising companies not to resume operations any sooner than an extended holiday break.

Tesla is among companies saying they are also monitoring potential supply-chain interruptions for cars built outside China.

The outbreak may reduce vehicle output by more than 1.7 million cars due to plant closures, according to IHS Markit. Hyundai halted all of its output in South Korea because of a wiring-part shortage caused by one worker at a supplier in China getting infected by the virus.

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