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Editor’s note: This article is from Krypton 36 “Future Automotive Daily” (micro-channel public number ID: auto-time), Author: Zhang.Author | Zhang Yi

Edit | Wu Yan
This is a silent spring.
The roaring machinery in the workshop was quiet, the busy workers disappeared, the traffic on the roads was frozen, and the cars that used to be shipped to the world were hard to find.
Twenty auto companies around the world stopped and stopped production at hundreds of factories in 26 countries, and more than 14 million workers from car companies temporarily closed. Global car sales may have fallen to their lowest level since 2013. US-listed car companies have seen their market value shrink in just one day.300 billion yuan.The recovery of the Chinese automobile market, which has just taken off, is followed by a second wave of tsunami.
According to real-time statistics released by Johns Hopkins University in the United States, as of 6:30 on the 26th, Beijing time, a total of 466,955 confirmed cases of new coronary pneumonia worldwide, 21,152 deaths, and 113,769 people were cured.The number of confirmed cases of new crown pneumonia outside China has reached 370,000.
The new crown epidemic “Black Swan” swept across the world, and it was a depression.From the global automotive industry that has developed intermittently for a century, the first time the collective button was pressed.
The car industry, which has been soaking in cold water for a whole year, failed to meet the warm dawn, but fell into freezing point.
Auto Depression is Coming
Medical equipment and materials from China have been continuously flown to the United States and Europe where the outbreak was concentrated by the hands of multinational car companies.
On March 24, Fiat Chrysler announced that it will use a car factory in China to produce 1 million masks per month and donate to US emergency personnel and medical institutions.Volkswagen Group purchases medical equipment worth 10 million euros in China and sends them to Germany. It manufactures masks at a joint venture in China. It also plans to use 3D printers to make medical ventilators.Even Tesla CEO Elon Musk, who had previously scoffed at the outbreak of panic, announced on Twitter that Tesla’s 1,255 ventilators purchased in China have been shipped to California’s first-line healthcare facilities.
GM plans to produce ventilators at its Como parts plant in Indiana, while Ford is working with 3M and GE Healthcare to produce ventilators and medical masks.Rolls-Royce, Jaguar Land Rover, Airbus and others received tasks from the British Ministry of Health and Social Security to make 20,000 ventilators as soon as possible, many of which are from China.
Behind many car companies’ “doing nothing to do their jobs” is an unprecedented shock in the century-long development history of the auto industry.
Almost at the same time that China ’s “war epidemic” achieved a staged victory, many countries around the world were reduced to “heavy disaster areas”, and they have declared a state of emergency.
The World Health Organization warns that the United States could become a new epidemic center.An unpublished study from the University of Oxford shows that half of British people may be infected.India announced a nationwide blockade for 21 days, Japan ’s Tokyo Olympics was postponed for one year, schools in many European countries closed down, all organized social activities were cancelled, and Australia restricted weddings and funerals.Russia is discussing severe penalties for violators of quarantine orders ranging from fines of $ 25,000 to seven years in prison.
On March 18, at the request of the American Automobile Workers’ Union (UAW), Ford, GM, Fiat Chrysler (FCA) and other Detroit Big Three factories in North America were shut down, affecting at least 150,000 workers.Prior to this, Ford and FCA European plants have been shut down for two weeks.At present, this wave of production stoppage has rapidly spread to Southeast Asia, India and Russia.
According to incomplete statistics from the Daily Automobile Daily (ID: auto-time), as of March 25, 20 mainstream multinational automobile groups such as Volkswagen, BMW, Toyota, Ford, and Tesla announced the closure of some factories worldwide.Hundreds of factories in 26 countries were affected.
Boeing, affected by the new crown epidemic and the 737 Max crisis, has also suspended production since March 25.According to the International Air Transport Association (IATA), the global aviation industry could lose $ 252 billion this year due to the coronavirus epidemic, equivalent to 44% of total revenue in 2019.News on March 26: South Korean power battery companies LG Chemical and Samsung SDI announced the closure of their US battery factories. The shutdown will end on April 13.
According to data from China Association of Automobile Manufacturers (hereinafter referred to as the “Automobile Association”), auto sales in February fell 79.1% year-on-year to 310,000 units, of which passenger vehicle sales fell 81.7% year-on-year to 224,000.Scope Ratings, a German rating agency, predicts that car sales in the European market may decline by 19% in 2020, and global new car sales may decline by 9%.Nihon Keizai Shimbun estimates that the production levels of seven Japanese mainstream car companies such as Toyota and Nissan will only reach half of 2019.British data analysis company LMC Automotive predicts that global light vehicle sales may drop to 86.4 million this year, reaching its lowest level since 2013.
In an interview with the BBC, the secretary-general of the Organization for Economic Cooperation and Development, Angel Guria, said that the economic losses caused by the New Crown epidemic have exceeded the financial crisis of 2008 and the “9.11” incident of 2001.
Darker than the financial crisis
The stock market plummeted, U.S. stocks triggered four fuses within two weeks, the Federal Reserve cut interest rates, and the growing shadow of the recession is evoking dark memories of the 2008 financial crisis.
Tourism is almost stagnant, businesses cancel conferences and exhibitions, store shelves are empty, and Americans line up to buy toilet paper and guns and ammunition.Standard & Poor’s predicted on March 24 that the US economy contracted at least 12% in the second quarter.According to a survey by the Wall Street Journal, 34 economists predicted that from the second to the fourth quarter of this year, US GDP will continue to decline, and the unemployment rate will climb to 7.4% by the end of the year.
The outbreak has impacted the sensitive global economic chain of the automotive industry.WTO Director-General Azevedo predicted on March 25 that the epidemic may lead to a more severe economic recession and unemployment than in the global financial crisis 12 years ago.
On March 12, the total market value of Tesla, Weilai, General Motors, Ford and other car companies evaporated about 314.6 billion yuan.As of the close of March 19th, Eastern time, Tesla’s market value fell from US $ 160 billion at the beginning of the year to US $ 78.563 billion in three months, which is equivalent to the evaporation of approximately 3.2 General Motors market values.Shares of Daimler and Volkswagen have also fallen 44% -48% over the past four weeks.
“If we compare the economic shock caused by this epidemic with the Great Depression of 1929-1933, its duration and scope of the shock may be beyond our imagination,” said Guan Qingyou, president of the Institute of Finance.
During the Great Depression of 1932, U.S. auto sales fell by 75%, automakers lost $ 191 million (equivalent to about $ 2.9 billion now), and nearly a third of dealers went bankrupt.From 1929 to 1931, Ford’s employees fell sharply from 128,000 during the peak period to 37,000, and the proportion of layoffs reached 70%.
The current storm may be more severe.
According to the 2019 sales and interest calculations of Volkswagen, BMW, Daimler and other three German car companies, German car companies will lose 360 ​​million euros (about 2.77 billion yuan) every day when they stop operating.The Ann Arbor Automotive Research Center in Michigan estimates that consumers will lose approximately 94,000 jobs and $ 7.3 billion in overall revenue every 7 days if consumers do not buy a new car.
According to incomplete statistics from the Daily Automobile Daily (ID: auto-time), from January to November 2019, the number of layoffs announced by the world’s leading car companies has been no less than 100,000, exceeding the total number of layoffs during the 2008 financial crisis.At present, more than 15 independent car companies, joint venture car companies and new car forces have joined forces to reduce their salaries, and many car companies are on the verge of layoffs.
On March 5, SAIC Motor Co., Ltd. announced a salary adjustment plan, which will reduce 75% of its performance salaries to employees below the senior manager level from March to June this year. All performance salaries of senior managers and above will be reduced.Shanghai Huizhong, a parts company of SAIC Motor, cut the salary of employees of outsourcing companies by 22.2%.The Pan-Asian Technical Center, jointly established by SAIC and General Motors, was cut and cut staff.BYD has encountered collective rights protections for its employees because of pay cuts.
The new forces that have not yet formed a scale are in a more difficult situation.Since February, Weilai Automobile has opened options that allow employees to convert 13 salaries into company stock.Weimar Automobile cancels the 2019 year-end award for all employees and delays the payment of 13 salary.An employee of Xinte Automobile told Future Car Daily that the company only paid basic salaries in February and March this year.
Multinational car companies are speeding up their layoffs.Daimler plans to lay off 4% of its staff in China in the first and second half of this year, including nearly 100 foreign experts from Beijing Benz.Audi also announced that it will lay off 9,500 people in Germany by 2025, with about 10% layoffs.Affected by a shortage of parts supplies, Seat is considering temporarily suspending employees at its Spanish plant.Seat union representatives said that “the layoffs could last 2-5 weeks and are expected to affect about 7,000 people at the plant.”
On March 24, American industrial giant General Electric announced that it would reduce 2,500 employees in the engine division of jetliners, reducing the number of employees by 10%.As the most profitable business of General Electric, more than half of the repair and maintenance employees in this department have been temporarily on vacation.
According to the European Automobile Manufacturers Association, there are about 229 automobile assembly and production plants in the European Union, which directly employs 2.6 million people to engage in manufacturing, and approximately 13.8 million people directly or indirectly engage in related tasks in the automotive industry. With the closure of European car companiesAs the operation continues, the work of about 14 million people is at risk.
Source: pexels
Second Tsunami Strikes
China, once at the center of an epidemic storm, is recovering from a standstill.
Dongfeng Group, headquartered in Wuhan, has successively resumed production and production.According to statistics from the China Automobile Dealers Association, as of the afternoon of March 23, among the 8556 4S stores of 141 auto dealer groups, the store return rate was as high as 93.8%, and the comprehensive return rate was increased to 66.2%.
Guan Qingyou said that for China, the stagnation of the entire world economy means that it will impact China’s economy a second time and once again affect China through the transmission of imported epidemics.He believes that “the first wave equivalent to the tsunami has just ended, and the second wave depends on our determination and energy to control.”
A car has about 30,000 parts, and the car supply chain is long and complicated.As multinational automobile companies build subsidiaries, open factories, and expand sales networks in the global market, the joint role of the automotive industry chain in the global market has become more apparent. China has become a key member of the world’s automotive industry.In 2019, more than 100,000 auto parts companies in China contributed more than 80% of the world’s auto parts and exports exceeded 60 billion US dollars.
The management of an automobile company’s production line told the Future Automobile Daily (ID: auto-time) that the factory formulates a procurement plan based on the production plan. The materials are generally prepared 2-3 months in advance, and the procurement time of imported materials will be advanced.The suspension of production by Chinese component companies for nearly two months caused supply disruptions to many foreign automakers.
Future Automotive Daily (ID: auto-time) was informed on March 25 that due to the shutdown of Italian suppliers, a joint venture car company is currently experiencing tight supply of key components, and individual component inventories are only sufficient to support this June.The factory is currently looking for alternative parts supply from other domestic channels.
“The automotive industry chain is long. Even if a screw factory is not resumed, the entire vehicle cannot be built.” An insider of an automobile company said that due to factors such as the long preliminary verification time of key components and complicated processes, changing suppliers is noteasily.
“In the short term, the epidemic will lead to the relative regionalization of the global auto market, and the world ’s major synergy will be affected.” Cui Dongshu, secretary general of the China Federation of Automobile Industry, told the Future Automotive Daily (ID: auto-time) that the single market door is closed and global industry synergy is closed.Efficiency is affected, and vehicle and component exports are affected.
In February this year, the decline in China’s auto exports expanded.According to data from the China Automobile Association, China ’s auto export sales in January-February this year decreased by 19.4% year-on-year to 113,000 units. In February, monthly export sales were only 45,000 units, which were 35.1% and 22.0% year-on-year decreases.Wei Jianjun, chairman of Great Wall Motor, which has always been aggressive in global expansion, also recently reiterated that the main battlefield of Great Wall Motor is still China.
“The epidemic has increased the cost of vehicle exports, including vehicle export quarantine and personnel out, etc., which is still a major disadvantage for China’s vehicle exports.” Cui Dongshu believes.China Automotive Strategy and Policy Research Center predicts that China’s total vehicle export sales will decline by about 5% in 2020.
Even so, the chain reaction of the Xinguan epidemic to economic shocks has not yet reached the full-scale outbreak stage.For example, Guan Qingyou, president of the Institute of Financial Research, predicts that the subsequent impact of the epidemic on the economic shock may last for several years, ranging from 2-3 years to 5 years or even 10 years.
Source: pexels
Looking for hope in the haze
Finding hope in the haze has become a common task for the global automotive industry.
Ping An Securities pointed out in the report that China’s first-line independent brands will get more opportunities for increase.On the one hand, the product lines of first-line independent brands cover a wide price band and may become the preferred brand for economic vehicles.On the other hand, these brands have strong financial strength and can flexibly introduce factory stimulus policies to seize more market share.
But faint opportunities cannot hide hidden dangers.The pressure from both sides of automobile production and market demand is prominent. Goldman Sachs predicts that the impact of the epidemic on automobile production and demand may lead to a reduction of 170 billion yen in Japanese profits (about 10.87 billion yuan)
“No auto company will get growth opportunities from this crisis, and some auto companies that were to be eliminated last year will accelerate their exit this year.” Auto industry analyst Zhong Shi told Future Auto Daily (ID: auto-time).
The rapidly rising financial risks have become the sword of Damocles overhanging almost all automakers.Cui Dongshu, secretary general of the China Federation of Vehicle Industry Associations, told the Future Daily that the most important thing for car companies in the first half of this year is to prevent risks, maintain stability, and ensure survival.
Many domestic and foreign automakers have launched self-help.In mid-March, Great Wall Motor revised the performance assessment targets for the restricted stock and stock option incentive plan for 2020, and GAC Group reduced costs by reducing management expenses and other measures.Ford Motor plans to activate a credit line of 15.4 billion U.S. dollars to ease the pressure on working capital caused by production shutdowns.
In addition to increasing their own anti-risk capabilities, Volkswagen, Toyota, Nissan, Mazda, Hyundai and many other car companies are also intensifying communication with dealers and component suppliers, taking measures such as delaying repayment and paying for goods in advance.
Some independent brand car companies have proposed that they can gradually relax or eliminate car purchase restrictions, increase support for popular products (within 150,000 yuan), introduce policies to encourage cars to go to the countryside, and eliminate local protection of new energy vehicles.
On March 23, major U.S. automakers, component suppliers, and auto dealers sent a letter to the U.S. Congress urging lawmakers and the government to take action to respond to the economic slowdown and provide “strong credit facilities” to ensure that the auto industry is in an epidemicCan maintain sufficient liquidity during the period.The American Automobile and Equipment Manufacturers Association has asked Congressional leaders to develop a “manufacturing emergency assistance” funding plan to keep factories running, keep workers at work, and prevent manufacturing companies from going bankrupt.
Many governments have reached out to the auto industry.
In the worst-hit US, the Federal Reserve cut interest rates twice in half a month, and President Trump pledged last week to lend a helping hand to the auto industry.
France has stated that it will take measures such as nationalization to rescue the two major auto giants that have been severely hit by the new coronavirus epidemic, and to save the “idols” of French industry.South Korea plans to help the automotive industry survive the crisis through logistics and financial support, with aid coming from an emergency financing of 50 trillion won (about 289.197 billion yuan) announced last week.China uses the “new infrastructure” investment list with a total value of over 30 trillion yuan to inject new momentum into the industry.
With the dual efforts of enterprises to actively save themselves and government assistance, it may help the automobile industry emerge from the current crisis as soon as possible.
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