When an avalanche occurs, no snowflake can escape the avalanche.

No car company is immune from an outbreak.

The key is: how to "save yourself".

The impact of the globalization of the epidemic on the automotive supply chain continues to intensify

Photo credit: baidu

According to the latest statistics, as of 7 o 'clock Beijing time on the 17th, the global total of new crown pneumonia confirmed cases of 173,344 cases, 7019 cases of death, the number of countries and regions have reported cases of 152, new crown pneumonia confirmed outside China 92,228 cases, Italy, Spain, Iran, Germany, the United States and other places are major disaster areas.

As the globalization trend of the new pneumonia epidemic continues to intensify, its impact on the automotive supply chain is also continuing to expand.

According to the latest news, in addition to the first new crown pneumonia outbreaks in China, in South Korea, Japan, Italy, Iran, India, the United States, Mexico, Brazil and other countries also successively appeared serious outbreak, leading to early only exist in parts of auto enterprises labor shortages, was forced to stop production, supply chain disruptions, the problem such as auto sales downturn, presents the globalization development trend.

In South Korea, for example, hyundai motor led the way in early February by announcing a gradual suspension of production at its south Korean plants. Subsequently, kia, ssangyong and Renault also joined in the stop-work to cope with the supply disruption caused by the outbreak of the new coronavirus.

As a result, total vehicle production fell 26.4% to 1.89235 million units in February from a year earlier. Domestic auto sales fell 18.8% to 978.97 million units. Exports in February were down 16.6% from the same period in 2019, to just $2.4 billion, showing a marked decline. Hyundai motor's exports fell 21.4 percent in February from a year earlier, while kia's overseas shipments fell 30.1 percent from the same period in 2019.

Photo credit: nissan

With the exception of suzuki, which has little manufacturing or sales in China, several major Japanese brands have been hit hard by the outbreak. According to Goldman sachs, the new crown SARS outbreaks influence on automobile production and demand, Toyota, nissan, Honda, mitsubishi, Mazda five Japanese carmakers' profit fell 170 billion yen (us $1.6 billion), they can reduce the total 580000 of the 1 to 4 months, including Toyota's capacity is expected to be 94%, nissan capacity utilization rate of 47%, while only 16% of the Honda's capacity utilization.

In Europe, major car and parts makers have been closing plants in Italy, cutting production and considering sending workers home in recent days, given that Italy has been the worst affected country after China. Volkswagen, for example, has reached an agreement with the main union at its plant in Navarra, Spain, to send some of its workers home because of supply disruptions caused by a new pneumonia outbreak. The agreement also allows vw to make some temporary job cuts in 2020. PSA Peugeot Citroen decided to close 15 of its plants in Europe until March 27. The FCA has also decided to close more plants in Europe because of the outbreak, most of which will be closed until March 27.

General in the United States, such as FCA, Toyota, tesla car companies, although the part has not been affected by the epidemic, but along with the increase in the number of domestic confirmed and parts supply shortages, as parts of North America and other parts manufacturing business, it is understood that the enterprise has been busy for several weeks.

In addition, Mexico, Brazil, India and other countries, the outbreak may bring serious consequences to the auto industry, has issued warnings. Some Mexican auto factories may have to shut down in the coming weeks as the outbreak of the new coronavirus affects shipments of key parts imported from China, local officials said. Anfavea, the Brazilian carmakers' association, warned that the country's carmakers might have to stop production in April because of a shortage of parts from China. India, tata motors, mahindra, TVS Motor and Hero MotoCorp company also has said, because of the outbreak will be faced with the problem of supply chain disruptions, including tata motors has asked the headquarters and regional offices of office workers since March 16, local time, begin to work at home, some other company has announced a pause in production.

Auto companies and parts companies to deal with the crisis

Whether we like it or not, the new pneumonia epidemic has developed into a global disaster.

The situation in China may be getting better, with more and more auto companies and parts companies returning to orderly production, but that doesn't mean everyone can rest easy. It is well known that there are about 20,000 to 30,000 parts in a car, and if the supply of any of them is abnormal, a car may not be built. It is unrealistic to rely on a single market for such a large supply of components, such as key domestic car parts, many of which are imported, and some cars made in other countries may also come from China, as customs export data show.

According to China's customs statistics, due to the impact of trade friction between China and the us, us sanctions against Iran and the global economic downturn, the import and export volume of China's automobile and its key parts and zero accessories reached us $151.53 billion in 2019, down 5.9% year-on-year. Of this, exports were $67.96 billion, down 2.9 percent from a year earlier. Imports were $83.57 billion, down 8.3% from a year earlier.

By region, the top 10 major export countries of China's automobiles and their key parts and parts in 2019 are: the United States was $14.28 billion, down 22.6 percent year on year; Japan's $4.55 billion, down 13.1% from a year earlier; Mexico $3.85 billion, up 8.2%; Germany's $2.64 billion, down 4.8% from a year earlier; The Russian federation reached us $2.46 billion, up 14.6% year on year; South Korea $2.2 billion, up 21.3% from a year earlier; UK $1.55 billion, up 3.6% year on year; Brazil $1.48 billion, up 9.6% from a year earlier; Thailand $1.47 billion, down 5.2% from a year earlier; Canada's $1.37 billion, up 3% from a year earlier.

This means that the normal operation of the global supply chain could be affected by the abnormal operation of any of the world's major automotive manufacturing and consumer markets, including China. Because of this, in order to ensure the normal supply of parts, enterprises have actively carried out various self-help measures, including air transport parts, replacement of suppliers, capacity transfer, etc.

● in the parts of the transport mode "do", such as air transport, the opening of transport train

In order to better carry out production and shorten the logistics time of parts, when selecting suppliers, many automobile companies often require the latter to set up factories near them, or the suppliers take the initiative to cooperate with the automobile manufacturers to set up factories near automobile companies. However, due to the outbreak of the new pneumonia, the production, logistics and transportation of many parts suppliers around the world have been affected, car manufacturers have no time to worry about the location of suppliers, for them, the most important thing is to ensure the continuous supply of parts. To this end, many car companies have started airlifting parts to keep production lines running.

Jaguar land rover, for example, flew parts from China to its UK plant in February to keep production going. Subsequently, saic anji logistics began to charter aircraft to provide emergency parts to ford and general motors, two multinational carmakers in North America.

On February 25, CK287 cargo flight of China Eastern airlines (cea), carrying 94 tons of spare parts for ford charter, departed from pudong airport and arrived in Bangkok, Thailand at 5 p.m. to ensure the supply of spare parts for ford's production base in Thailand. On the same day, a China Eastern cargo flight carrying 422 auto parts weighing 80.45 tons took off from pudong airport and arrived in Chicago in the early hours of Feb. 26, keeping the supply chain open at GM's manufacturing bases in North America, Brazil and Argentina. In all, gm is said to have deployed 16 charter aircraft to secure parts.

In march, more companies joined the airlift group as the outbreak began in more countries, causing widespread traffic disruptions and shutdowns among car and parts companies. Luciana Herrmann, nissan's communications chief in Mexico, for example, said the company had started shipping parts to its plants in Mexico by plane rather than by ship to avoid production problems, despite rising costs.

Photo credit: Mazda

One Mazda supplier is trying to solve a production shortage of parts for the exterior of its Mazda 3 and cx-30 models in China by increasing parts production at its Mexican plant by 50% and airlifting them to Mazda's assembly lines in Japan. The move is reported to have cost Mazda more than $5 million, despite high logistics costs, but only if it does not want to stop production.

Gac also recently proposed to mobilize global resources for its partners to airlift parts for joint ventures in China. Even some Indian companies have decided to ship car parts by air, which is smaller and more expensive.

A similar way is to open a special train transport. At the beginning of march, a special train carrying 9,200 car seat frame frames and 9,520 seat back frame frames set off from wuhan station and traveled more than 2,100 kilometers to jilin on March 9. It is reported, this batch of goods is auto works Car Co., Ltd to return to work and production are in urgent need of the first batch of auto parts, to ensure the orderly of Faw group, return to work in jilin province transportation hall to the security office of the Ministry of Transport logistics transportation security requirements, after receiving the demand, the department of transportation logistics security office issued no. 49 emergency transportation task instructions, coordinated national railway emergency transportation task group.

In the relevant person in charge of mahler's view, to guarantee a continuous supply of spare parts is the responsibility of the automotive industry suppliers, in this outbreak, each enterprise to increase delivery frequency, sea to air, hand pick up the goods and other measures to protect for is the last way, supplier for large enterprises, more layout, double certification is the way to avoid risk in advance. Not only that, according to the head when building a supply chain system, the supplier should be comprehensive consideration of putting various factors, the core components and materials to the stationing, in different countries and areas designated suppliers to comprehensively consider the supplier's business, quality, delivery, technology, and risk factors, so to form a good supply system, guarantee the global production and supply.

● change suppliers

This is also a lot of car companies are now more easy to think of a method. For example, in order to ensure the smooth resumption of production at the chunxiao base, geely has replaced some suppliers outside ningbo. Around early February geely officially return to work, but because the logistics between the barriers, led to geely outside ningbo supplier cannot deliver components in a timely manner to the geely production bases in the city, many foreign suppliers to return to work time is geely also later, to ningbo via letter bureau has combed out 350 local parts QiYeMing LuGong geely selected, the final cobolli gigli chose to 35.

Photo credit: Toyota

Toyota, which relies on a global supply chain system, took just three days to find a replacement plant for a component supplier in wuhan that had been slow to return to work. The FCA, the first European carmaker to halt production because of the pneumonia outbreak, also began looking for alternative suppliers half a month ago. Indian carmakers, too, are trying to find alternative suppliers of parts.

However, due to the closure of changed suppliers, often need a large number of experiments on new products, adjustment and certification, in order to pass the regulation test, to achieve stable production scale, the whole process go down need months of time, or longer, and if it is a core technology industry monopoly enterprises, almost could not be substituted. So not everyone is happy about this approach, especially now that there is a lot of uncertainty about changing suppliers temporarily because of the outbreak.

"In the event of an outbreak, the development of alternative suppliers is one approach, but its effectiveness depends on the complexity of the validation. For example, mahler's product is directly related to engine performance, and the validation cycle is long, the technical requirements are high, and switching is unlikely." Said the respondents.

It is worth mentioning that the dual-supplier model has already existed in the automobile industry. In the early stage, in order to control the price and save the cost, some automobile enterprises chose multiple parts suppliers to supply at the same time. While this model can be controversial for some companies to use incorrectly, it can be useful for achieving a stable supply of components, as is the case now. From this point of view, after the outbreak, do not rule out that more car companies and parts companies will adopt this model.

● transfer capacity

In this outbreak, many companies have taken such measures to deal with the crisis. F-tech, for example, which supplies brake pedals to Honda's cr-v, announced in late January that it was moving capacity from its wuhan plant to the Philippines and said it could move more if the disease spread. Hyundai's wire harness supplier, youjin denso, is also shifting some of its capacity abroad, while another, jingxin group, is trying to increase its capacity in the u.s., India, Cambodia and South Korea to make up for a drop in capacity in China. Rohm semiconductor, an automotive electronics company, also said it would make alternatives in southeast Asian countries such as Thailand.

Photo credit: ROM

Because of this, there is also a lot of speculation about whether the outbreak will drive the supply chain abroad. State, the car has launched an investigation, according to the results in 1334 participants, only 13% of respondents think the outbreak of globalization will accelerate the automotive supply chain transfer to southeast Asia, Africa and other regions, and more participants insisted unshakable status in the global supply chain in China, and think that automobile industry chain will also speed up together to China.

This is not unreasonable. Although compared with southeast Asia, Africa and other markets, China is no longer have the cost advantage, but in terms of the vehicle manufacturing and consumption, global auto industry on the degree of rely on the Chinese market is unmatched by other markets, because of this components for nearly two years a large number of multinational companies choose to invest in China plant, some even started to research and test center is located in China, as a global strategic priorities based on Asia and radiation.

Moreover, the transfer of automobile supply chain is not only dependent on the level of labor costs, but also with the infrastructure supporting, operating costs, supporting systems, transportation conditions, manufacturing culture, etc., and these conditions have been very complete in China. In particular, the integrity of China's auto manufacturing industry. According to the data released by the research on the development of China's auto parts industry in 2018, there are more than 100,000 parts enterprises in China, of which 55,000 are included in statistics, basically covering 1,500 parts. Even in more cutting-edge technology fields such as autonomous driving, China's auto industry chain also has a certain degree of integrity.

Moreover, the pneumonia epidemic has spread globally, affecting more than just China, and at this point there is now room to move capacity to other countries