Before the coronavirus outbreak, the auto manufacturing industry was in the midst of a breakthrough. Advancements in technology placed the sector in a good position to address consumer needs thanks to the power of AI and automation. However, everything seems to point to a bleak future now that the coronavirus has negatively affected the global supply chain. With quarantines and total lockdowns in place, the automotive industry is dealing with much uncertainty.
Most of the companies that aimed at cutting their production costs have outsourced their parts to China: as much as $34 billion dollars of motor parts were sourced out annually from China. Back in February, Fiat Chrysler Automobiles announced that their manufacturing of automobiles would stop because the situation has made it difficult for them to source their car parts from China. However, when you look at it from the belly of the industry, it is notable that these companies are taking the events day-by-day. They seem to evaluate and reevaluate how they can best succeed against the invisible foe.
Dealing With the Delays
Perhaps what’s more important to consider is how the automotive industry is looking at the foundation of the supply chain. China is now reopening their businesses. Many are trying to lessen the impact of their production delays, which now stands at 90 days. However, this may become even more prolonged, depending on how long it takes before scientists and experts can defeat the virus. This uncertainty is creeping up on automakers and their ability to launch new models. With international borders closed and the economy is at its worst, a car purchase is now virtually impossible and in any case more and more daunting. Car insurance agencies are returning premiums because no one is driving on the road. Calls to car accident attorneys are now few and far between because most people are in quarantine and there are fewer accidents.
Moving Manufacturing Away from China?
In a surprising move, Japan has announced that it had set aside money to pay Japanese companies to relocate their business operations out of China. White House National Economic Council Director Larry Kudlow also called on the federal government to shoulder the cost of American companies based in China. But now that Chinese manufacturing is restarting as the rest of the world is in lockdown, everything remains up in the air.