Car companies will be cautious in restarting operations in China

Following the news that Honda and Nissan have resumed limited manufacturing operations following coronavirus shutdowns at factories in Hubei province, China;

David Leggett, Automotive Editor at GlobalData, a leading data and analytics company, offers his view:

“The resumption of even limited manufacturing operations at Honda and Nissan factories in Hubei province is a welcome development, of course. But the crisis in the world’s largest car market and industry is far from over.

“Both companies will be proceeding cautiously. They have to establish where they are with lower demand, stock levels of finished vehicles and components, and also the robustness of the supply chain and future supplies of critical parts. It will be many weeks before they will resume capacity utilization approaching anything like normal levels.

“For both companies the loss of sales in such a key market is a big issue, but especially for Nissan given the pressures on its bottom line. The additional drop to the market in China this year will further dent Nissan’s already under-pressure profitability level, piling on the pressure to make cost cuts elsewhere. A poorer cash-flow position will also reduce available funds for much-needed investment.

“Over the next few months, much depends on the rate of progress in tackling the public health crisis. If the return to work in China is too fast, there could be another wave of coronavirus infections and another headache for the authorities, as well as further setbacks for the economy later on. First gear only for now.”

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