The viral impact (Part I of II)
- March 24, 2020
- Auto Extended Warranty, Extended Auto Warranty, Extended Car Warranty
- Posted by Derek Michael Weissman
- Leave your thoughts
These days everyone is talking about the bug. Coronavirus is spreading quickly, and while we will likely get through this, things aren’t looking good in the short-term. By the time you read this there will have been some considerable changes that aren’t reflected here either. But we’re a car blog so cars we’ll talk, and when General Motors was bit by a 6-week strike last fall they likely thought they had seen the worst of it (from an economic point of view). Showrooms took a hit as did independent service shops (where repair parts for cars plummeted due to supply shortages). But fast-forward to today, and with the virus the effect on the auto sector is likely to be worse.
The epicenter, China, has all but shut down their vehicle-manufacturing sector since late January. The production and shipment of Chinese-made auto parts to the U.S. has been severely compromised, a business valued at $17 billion plus last year. And this number doesn’t include parts shipped to Canada and Mexico that eventually make their way to the U.S. Manufacturers like Hyundai, Honda and GM to name a few are struggling to maintain their supply chains in tact. Many Chinese plants have already re-opened but in terms of people back working in said plants, only 20 to 30 percent have returned and the plants are operating at a mere fraction of what they should be.
Like most things, this will all take some time to be felt (financially speaking). U.S. production will be impacted within a month or perhaps a month and a half, but the services and parts side will feel it much sooner. China for one is a massive producer of replacement body parts and these account for roughly 10 percent of their global parts exports ($14.2 billion last year). Those are serious bucks and much of that is destined for collision repair work. Another 5% of exports are comprised of Chinese-made tires that amount to $7.9 billion.
Stay tuned for Part II.