China is slowly restarting it economy after a harsh lockdown that brought it COVID-19 new cases down to zero. The industry that we watch is its automotive industry, its car factories and it car showrooms. The weekend from Easter to date is showing promise of its ability to restart its auto industry and this is good news for the automotive supply chain and many car brands in Malaysia who are reliant on Chinese parts manufacturers.
When China’s economy plunged due to Covid-19 early this year, the European and North American car manufacturers with a strong presence were faced with plunging sales.
Now, as China gradually reopens for business and car manufacturers restart their factories and reopen their car showrooms, there seems to be a boost for brands like General Motors, Volkswagen, Mercedes-Benz, Audi, Porsche and BMW to name a few.
Showroom traffic at reopened car dealerships in China remains slow even though the coronavirus epidemic has largely been brought under control in the country.
New Car Sales Start
While 98.8 percent of franchised dealerships reopened last Friday, average showroom traffic stood at just 66.4 percent of normal levels, according to the latest survey by the China Automobile Dealers Association.
Also, last Friday, average revenue generated by new-vehicle sales was only 63.8 percent of normal levels, according to the survey of 8,721 franchised stores across China. This is still considered good seeing a many businesses suffered losses and jobs were affected.
Also, when dealerships workshops were surveyed, they disclosed that average parts and service revenue was at 66.8 percent of normal levels.
2019 Sales Figures
Last year, carmakers in China sold 21.05 million passenger vehicles, compared with slightly less than 17 million in the United States and 15.8 million across the European Union, according to the German Association of the Automotive Industry (VDA).
February marked the biggest monthly drop in car sales in China’s history, with a 79 percent plunge, according to latest figures from the China Association of Automobile Manufacturers.
Japan’s Honda Motor Company has reopened its factory in the Chinese city of Wuhan, more than two months after it was closed. But the reopening came with new virus protection measures, including temperature checks for workers and a rule that employees keep more than one meter apart.
The factory is co-owned by Honda and China’s Dongfeng Motor Group. It was shut in late January when officials ordered a lockdown in Wuhan over the coronavirus epidemic.
The factory reopened on March 11 and began operations slowly. It is now back to its pre-virus manufacturing rate and returning workers were asked to report where they had been since the epidemic started. They were also asked to get their temperatures checked. A high temperature is one of the main signs that someone might be infected with the coronavirus.
This week, some 98 percent of the 12,000 factory workers were now back on the job. This co-owned car manufacturer produced 800,000 cars last year.
IHS Markit expectations for Mainland China have been downgraded by 2.3 million units for 2020, with light vehicle sales forecast to post 22.4 million units for the year, down almost 10% year over year. China is expected to show signs of bottoming out through the second half of 2020, but we caution that the scale of the economic slowdown will likely lead to some destroyed demand.
