How Does Hubei'S Auto Industry Overcome Difficulties?

Affected by the outbreak of pneumonia caused by the new coronavirus, many production and business activities in Hubei are stagnant. Since the beginning of this week, enterprises in various parts of the country have been resumed, but the enterprises in Hubei are facing greater challenges of resuming work.

Recently, the Japanese Honda Corporation said that the auto manufacturing plant in Wuhan, Hubei province continued to suspend production and is expected to resume production after February 17th. Kurashi Makotoshi, vice president of Honda, said at a press conference: "we will confirm the safety of employees and the supply of spare parts, so as to prepare for the resumption of work on the 17 th week."

In addition to Honda, a number of car companies in Hubei province have announced delayed start. Earlier, Shenlong Automobile announced that the company resumed its working hours not earlier than 24 hours in February 13th. Dongfeng commercial vehicle also issued a circular saying that it was scheduled for February 3rd (Shiyan) and February 4th (Wuhan area) to postpone working hours.

Hubei is one of the longest areas in the Spring Festival holiday issued by the government. According to the notice issued by the general office of the Hubei Provincial People's Government on February 1st, the province will extend the Spring Festival holiday in 2020 to February 13th (including the field personnel visiting Hubei to visit relatives and friends during the Spring Festival), and will normally go to work in February 14th.

As a major vehicle industry in the whole country, the auto industry in Hubei province has pressed the pause button, which has tested the anti risk ability of automobile and parts enterprises in Hubei province. On the other hand, it has also brought some tests to the operation of the national automobile industry.

Delayed return

Delayed recovery is the common situation faced by Hubei car companies and factories in Hubei. However, after the provincial government has designated the earliest start date, there are still many car companies unable to establish specific starting time.

In February 10th, a person close to SAIC general told the twenty-first Century economic report that the specific start time of the Wuhan plant had not yet been notified.

Hubei province has brought together a number of car companies and their production bases, including Dongfeng Group (including Dongfeng Honda, Dongfeng Nissan, Dongfeng Renault, Dongfeng passenger car, etc.), SAIC GM and so on. Among them, SAIC GM Wuhan base is located in Jiangxia District of Wuhan, and is the fourth passenger vehicle production base of SAIC.

Because of the epidemic frontline, the overwhelming majority of the work is centered around epidemic prevention and control and demand protection. It is difficult to determine when the production conditions are available. Therefore, the recovery of automobile enterprises in Hubei will be more difficult than that in other parts of the country.

However, the delay in the resumption of work will directly affect the actual output. The specific degree of impact will depend on the time when all enterprises return to work. From this perspective, Hubei car enterprises will undoubtedly face greater risk of production and sales fluctuation.

According to incomplete statistics, Hubei's automobile output reached 2 million 240 thousand vehicles in 2019, accounting for 8.8% of the whole country, of which Dongfeng Honda accounted for the highest proportion. It built three factories in Wuhan. In 2019, the production of passenger cars accounted for 49% of Hubei's output, followed by SAIC, accounting for 26%.

It is worth mentioning that the two phase of SAIC Wuhan base project has just been completed and put into operation this year. The total investment of the project is 7 billion 500 million yuan, covering four workshops of stamping, body painting, coating and assembly, and a series of supporting facilities, which can accommodate 4 platforms and 6 models for collinear production. The epidemic is likely to drag down the launch schedule of the base.

Besides the car companies, the automobile supply chain enterprises in Hubei also further delayed the commencement time. Xiangyang bearing, a listed company, recently announced that the initial plan is scheduled to start in February 14th, but there is still uncertainty about whether to return to work on schedule, and the company said it will not start in February 28th.

In Hubei Province, there are quite a few businesses that build capacity suppliers, such as win win electronics, said in the announcement that the safety plant located in Jingzhou, Hubei is mainly aimed at Dongfeng Honda, Dongfeng Nissan, Shenlong Automobile and other customers. However, a large number of large parts production enterprises have been brought together in Hubei Province, and their products are distributed all over the whole international automobile market.

It is understood that there are more than 100 auto supply chain enterprises in Wuhan, Hubei Province, including BOSCH, glark, Delphi, Valeo and Wanxiang.

An international supplier of internal components said to the twenty-first Century economic report that it can cope with it in the short term, but if it does not start later, the supply will go wrong. He admitted that the current inventory is only enough for two or three months.

Relying on existing inventory is the main coping mode for current component suppliers. Xiangyang bearing also said in the announcement that, according to the current communication with suppliers and customers, the products needed by the main customers after resuming work have been provided with goods at the customer's location before the Spring Festival, while the company's headquarters also has a certain number of inventory products, which can be directly sent to customers after the logistics is restored.

However, at the same time, many logistics enterprises are still in the process of recovery, and logistics is the common concern of enterprises in the industrial chain after the restoration of production.

In the context of the temporary stagnation of many suppliers in Hubei, the capacity of the car companies that have already started will be limited. One vehicle owner told the twenty-first Century economic news reporter that he has been sorting out logistics and supply chains these days, and coordinating related resources to minimize the impact of local suppliers' downtime.

How to tide over difficulties?

Hubei automobile industry, which is at the center of risk, has just returned to light in the second half of last year under the background of car market downhill.

According to local media reports in Hubei Province on October 30, 2019, according to the provincial information office, there are positive changes in the automotive industry in the whole province. The added value of the automobile industry has been accelerating in the four consecutive months since June, and increased by 15.1% in September, the highest level in the past 21 months.

Since July 2018, the domestic car market has encountered cold currents. In 2018, China's auto production and sales decreased by 4.2% and 2.8% respectively, representing the first negative annual growth in 28 years. In the same period, Hubei's automobile output was 2 million 660 thousand, down 9.6% compared to the same period last year, and the added value of auto industry increased by 2.7% compared with the same period last year, which is lower than the 4.4 increase in the industrial added value of the whole province, which is lower than the 11.8 percentage point in 2017.

Despite the year-on-year decline in vehicle output in Hubei Province in 2019, there has been a steady recovery in the second half of this year. However, the overall situation may face challenges again due to the outbreak.

Hubei is an important place for production and sale of automobiles. Whether local enterprises can tide over difficulties is related to the rise and fall of the national automobile industry. Experts from the automotive industry said that under the current special circumstances, the upper and lower reaches of the industrial chain should be given more understanding and flexible consultation and flexibility in the supply cycle and account period.

In fact, many host factories have implemented "decompression" measures to dealers in this period. Taking Volvo automobile as an example, it not only relaxed the business assessment index, but also set the sales target of February, and also provided the dealer with a special employment subsidy of over ten million yuan to reduce their financial pressure.

At present, car companies themselves are also facing greater business pressure. In the synergy of the upstream and downstream industries, there may be more time to deal with them, such as vehicle enterprises giving more limited delivery time to suppliers, and suppliers also try to avoid lifting the price of parts.

From the policy point of view, the auto industry is also looking forward to the corresponding incentive policies of local governments. A person in charge of a car company in Shanghai told reporters on twenty-first Century economic report that after the epidemic situation was controlled, the government hoped to introduce measures such as lowering the purchase tax and promoting consumption promotion.

In terms of business support, many local governments have issued relevant policies. Up to now, many provinces and municipalities in Hunan, Chongqing, Zhejiang, Shandong, Shanghai and Beijing have issued supporting policies to support SMEs in the past, which involve fiscal, tax, security, export and so on.

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