Auto sector recovery in Wuhan, China

Text by: Aabla Jounaïdi Follow

In Wuhan, the epicenter of the coronavirus epidemic in eastern China, the time has come for economic activity to resume. For several days, the factories have been restarted gradually after more than six weeks of complete shutdown. For the automotive industry, one of the main industries in the area, the recovery will be gradual. In the Wuhan Basin, auto manufacturers are just beginning to announce the restart.

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In the Wuhan basin, which is nicknamed the “Chinese Detroit”, in reference to the historic heart of the automobile in the United States, the factories, which have been shutdown since the end of January, will be relaunched gradually. Their shutdown has had a major impact on all Chinese automotive activity. “ There are five car pools in China. Wuhan is one of the big ones with Dongfeng. Many companies, including French ones, are located locally. So, this is a real problem, ”explains Jean-François Le Bos, a manager of the equipment supplier Financière SNOP Dunois, who has a presence in Wuhan.

A gradual restart

But the restart will not be done at the same rate for everyone. Japanese automaker Nissan has announced a partial resumption of production at its local plant. One of the Honda sites will restart in Wuhan at the end of the week. French manufacturers like Renault and PSA are giving themselves more time. They suggest a restart in the course of next week. " But it will not be a snap of the fingers, " as the PSA spokesperson said. Relaunching machines, logistics, repatriating workers to the area, will take time. Especially since any recovery is subject to the green light from the authorities. The urgency is not the same for the French. The tricolors have not made the breakthrough they hoped for on the Chinese market. Demand collapsed anyway with the coronavirus crisis.

Factories everywhere

In the wake of the manufacturers, there are the automotive suppliers. Many of them are French like Valeo, Faurecia or Plastic Omnium. It is they who supply manufacturers with the brakes, seats, lighting systems and dashboards for vehicles. With the factories shutting down, the whole challenge was for them to avoid a supply disruption. Many have run other factories they own in China or the region as much as possible, taking advantage of what is known as double sourcing . But it's not without risk either. " This results in logistical difficulties, in additional transport costs which are difficult to detect in the current context ", judges Marc Mortureux, the general manager of the Automobile platform, an organization which defends the interests of the sector in France.

Sales continue to decline in Europe

Now, concern has taken hold of the European automobile market. Besides, for some electronic parts, this market is less dependent on Chinese parts. This has enabled it to maintain itself in recent weeks. But with the scale of the crisis in Italy, the regional supply source is threatened. The FIAT group decided this week to close several of its sites to disinfect them. A temporary closure, but if the epidemic were to continue, it would have the same effects as in China, on supply and demand. At the start of the year, sales fell in the main markets, including Germany. An effect of the coronavirus, but also of factors already at work, such as the change in regulations on polluting vehicles and the uncertainties linked to Brexit .

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