SHANGHAI—The spread of the deadly coronavirus appeared to slow recently in China, and the country's mammoth auto industry has begun to ramp up to production. But business still is far from normal.
In China, travelers are required to be quarantined at home or in hotels for two weeks upon arrival. That means that factory workers who commute from long distances face restrictions on when they can come to work. Truck drivers must stop and have their temperatures taken when driving across provinces, and before businesses can resume operations, they must wait for government approval.
After the national government extended a business shutdown to Feb. 9 in an effort to keep people home and let the virus abate, most auto makers waited even longer—until Feb. 17—to restart factory output. But, with various other constraints brought by the epidemic, they had only managed partial production as of Feb. 22.
Volkswagen Group, the largest car maker in China, said on Feb. 17 that because of logistics and supply chain challenges, as well as the difficulty for its employees to return, it postponed the start of production at its joint venture with SAIC Motor Corp. by another week, to Feb. 24. The partnership operates eight of VW Group's 14 plants in China.
For similar reasons, FCA Group, which builds Jeeps at two plants in China, has yet to resume output at its plant in the central China city of Changsha, after reopening its factory in the south China city of Guangzhou.
General Motors, Honda Motor Co., Nissan Motor Co., PSA Peugeot Citroen and Renault SA have plants in Hubei Provence, the epicenter of the health crisis.
Health authorities said that the pace of new infections in that region has not declined. As a result, the Hubei government said its businesses will not be allowed to restart local production before March 11.
Dealerships still closed
But even if auto makers could resume full production sooner, their retailers still would not be able to sell their vehicles.
Auto dealerships are coming back to business at a slower pace than vehicle makers, according to the China Automobile Dealers Association, which has been tracking dealerships' daily operations since Feb. 11.
Only 29 percent of China's 4,661 new car dealerships had reopened as of Feb. 20.
Their biggest hurdle in reopening? The lack of government approval to do so.
Retailers also are thwarted by a high absentee rate of employees and a shortage of protective resources, such as employee face masks.
Given the halt in showroom traffic because of the epidemic, retailers reported average new-vehicle sales on Feb. 20 at only 7.4 percent of the volume they recorded a year earlier.
Drag on growth
LMC Automotive forecasts that the coronavirus emergency will continue into the second quarter and drag China's economic growth for this year to 5 percent, down from 6.1 percent in 2019.
In tandem, new light-vehicle sales in China, which have contracted for two straight years, will drop by 3 to 5 percent this year, it predicts.
Before the outbreak, LMC had expected the market to grow again in 2020.
The China Association of Automobile Manufacturers is more pessimistic. It projected that new-vehicle sales, including trucks and buses, will slip by 5 percent this year—assuming the epidemic can be brought under control before April.
The slowing spread of the illness indicates that the outbreak probably will be contained in a few months. But another year of auto market contraction seems to already be guaranteed.