Production suspension in China affects supply chain in the whole region.
Asia-wide car sales are expected to dip 3.1% in 2020, according to a Fitch Solutions report. This is compared to its growth forecast of 1.5% in Q4 2019 amidst cessation of production and movement restrictions from countries affected by the Covid-19 outbreak.
According to the report, even the largest exporters of vehicle components in Asia experience downside risks as production stops in China and limited consumer movements are implemented across different countries. However, the situation is expected to improve by the second half of the year as these countries have sufficient capacity to ramp up output quickly.
China, the country most impacted by the virus, is experiencing a shortage of supply as vehicle production halts and consumers are restricted with their travels. The report noted that rebuilding cars will not be enough to counter the impact brought by the temporary shutdown of factories and movement restrictions on consumers already had a significant impact on the industry.
Major market contributors South Korea and Japan also recorded declines in their vehicle sales. Fitch Solutions is projecting a 7.3% decline in South Korea and lower YoY fall in Japan by 11.7% and 10.3% for the January and February 2020, respectively.
Meanwhile, India, which owes 10-30% of its automotive components in China, is still struggling to restore growth in automobile sales. New vehicle sales in the country are also expected to contract by 6.7% in 2020-2021.
Thailand will not be spared as well, as it is one of the biggest exporters in the Asia region.
“Thailand’s automotive production faces downside risks from work stoppages in Japan as the country imports critical Completely-Knocked Down (CKD) assembly kits from Japan,” Fitch stated in the report.
Southeast Asian countries will be affected as well, no thanks to the lack of supply. The report cited data from Trademap, whereas Myanmar had the ASEAN region’s largest share of Chinese vehicle components imports with a share of 28% in 2019, followed by Vietnam with a share of 16.5% and Thailand with a share of 12.7%.
Despite the pessimistic forecasts, Fitch noted that the ASEAN markets still stand out with having better growth opportunities for vehicle sales with a 3.5% growth forecast this year.
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