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Indications have emerged that automakers are a bit cautious of resuming operations in the world’s biggest automotive market.
The news that Honda and Nissan have resumed limited manufacturing operations following coronavirus shutdowns at factories in Hubei province, China is lending credence to this.
Commenting on the situation in China, David Leggett, Automotive Editor at GlobalData, said the Coronavirus crisis is not over yet and carmakers might just be putting their operations on “First gear only for now.”
His words: “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.”
According to Leggett, “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.”
He added: “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.”
Leggett maintained that “Over the next few months, much depends on the rate of progress in
tackling the public health crisis.”
He stressed that “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,” saying “First gear only for now.”
