China set to lose out on production of 1M vehicles as coronavirus closes car plants

China could suffer the loss of a million vehicles worth of production as factories in its crucial automotive industry remain shuttered until at least next week — and likely longer in Wuhan, the "motor city" at the center of the coronavirus outbreak.

With more than 24,000 people infected, the impact of the highly contagious disease is also beginning to be felt by automakers in other parts of the world. Hyundai is suspending production in its South Korean plants because of a shortage of Chinese-made parts, and even European car manufacturers could be hit: Volkswagen and BMW could see a dip of 5 percent in their earnings for the first half of 2020, according to research firm Bernstein.

“Automakers with factories outside of Wuhan said this week that they are scheduled to start (back up) next Monday, Michael Dunne, head of Asian automotive consulting firm ZoZo Go, told NBC News. “The reality is that no one knows how this will play out.”

Chinese authorities have been struggling to deal with the rapidly expanding health crisis. Authorities initially hoped to confine it to the Hubei region where some experts believe it emerged from a meat market. Coronavirus cases now have spread across the country, with government reports indicating the death toll has now exceeded the numbers from the 2003 SARS epidemic.

Hubei’s capital city of Wuhan serves as a major production base for the Chinese auto industry, especially foreign manufacturers such as Nissan, Kia, Peugeot, and Honda. Nissan produces about 1.5 million cars a year in the city, Honda about 700,000. A number of indigenous Chinese automakers, such as Nissan partner Dongfeng, also operate in and around Wuhan.

The initial plan of attack saw plants in the city closed until this past Monday. That was extended to February 9 and could stretch on even further. Meanwhile, automotive operations in other parts of China are also being hit with extended shutdowns. That includes factories in Shanghai, the largest automotive manufacturing center in the country, as well as the capital city of Beijing.

“Nobody in cities like Beijing and Shanghai and Guangzhou are venturing outside,” said Dunne. And with no clear timetable for the auto industry to get back to normal, “It is looking like there will be about 1 million units of lost production,” Dunne said, equal to about two weeks of normal Chinese output.

Over the past two decades, China has grown into the world’s largest automotive market and the vast majority of the vehicles sold there are produced locally.

Joseph Massaro, chief financial officer for auto supplier Aptiv, said during an earnings call last week that he expects first-quarter vehicle production in China to be off by 15 percent, though he added he hopes that much of that could be made up with overtime during the rest of the year.

IHS Markit has issued a more bleak forecast warning that, if the effort to control the coronavirus epidemic echoes what happened with SARS, much of the Chinese auto industry could be idled into March, costing about 1.7 million units of lost production.

Complicating matters, a number of global manufacturers have begun ordering foreign nationals to leave China. Toyota last week banned employees from flying to China “until further notice,” according to company spokesman Eric Booth, who said the automaker “will continue to monitor the situation.” Tesla, GM and Ford are among the companies that have enacted similar restrictions, with some carmakers also racing to extract employees from China.

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