The coronavirus outbreak, which has all but sealed off China’s Hubei province from the rest of the world, could have an outsize impact on the global auto industry, which has a large footprint in the region in central China. reports The Wall Street Journal (Feb. 2, 2020). The virus’s spread has disrupted car manufacturing in China and prompted major auto companies with operations there to restrict travel and ask employees to stay home. One German auto supplier said that at least 5 employees had been infected.
The Chinese auto industry has grown from virtually nothing 30 years ago to become the world’s largest market for new vehicles. Wuhan, Hubei’s capital, has in that period emerged as an auto-making hub, home to state-owned Chinese Dongfeng Motor and numerous assembly plants for Honda., Peugot, and GM. Auto makers in Wuhan were expected to produce 1.6 million vehicles this year, contributing 6% of overall Chinese output.
Honda said it wasn’t sure when its 3 vehicle plants in Wuhan would reopen in light of the epidemic. These factories can build 600,000 vehicles/year–half of Honda’s total capacity in China. Webasto, a German auto-parts supplier, stated that four employees in Germany had contracted the virus after an employee from China visited headquarters. Bosch, the world’s biggest auto components supplier, warned that coronavirus could impact its global supply chain, which is heavily dependent on China. (Bosch relies on China for exporting electric motors, transmission and power electronics for electric cars).
The virus’ impact is not only on production and distribution of vehicles in China, but has major implications on global supply chains in other manufacturing arenas. Foxconn said it would keep its Chinese factories closed until mid-February. The move could affect global supply chains for tech companies that rely on Foxconn to manufacture everything from Apple’s iPhones to flat-screen TVs and laptops.
Classroom discussion questions:
- Might this disease have a lasting impact on global supply chains?
- What other industries are being affected in the US?
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