British Asia Network - Shahzad Sheikh
London 28 March 2020 - Volkswagen is reported to be losing $2.2 billion a week as the COVID-19 Coronavirus halts production for one of Europe's biggest car makers. Production throughout the auto industry has halted on both sides of the Atlantic and in Japan and manufacturers are now reeling from dramatically downgraded credit ratings which will cost them further billions.
The S&P downgraded Ford's credit rating to junk on Wednesday. Other manufacturers that have been downgraded include BMW, Toyota, Nissan and Honda, whilst General Motors, Daimler, Jaguar-Land Rover, PSA Group, Renault, Volkswagen, Volvo Cars and McLaren Holdings were all put under review.
A deteriorating economic outlook and the production stoppages are putting severe pressure on all companies and particularly car manufacturers as Moody's indicated that demand for cars would drop 'meaningfully' over the coming months in Europe and North America. It has suggested that demand will shrink 14% in 2020 and drop by a third in the second quarter of the year.
Echoing this the Society of Motor Manufacturers and Traders (SMMT) in the UK has anticipated that British car production will drop by 18% this year, coming off a surprisingly robust February which only saw a drop of under 1% - mostly due the exports to the US and Asia falling substantially. It has estimated 200,000 fewer units to be produced this year, however has dire warnings of even bigger falls if the shut-down ends up lasting months rather than weeks. Commercial vehicle manufacturing in the UK was already down 13.6% in February.
However hope does come in the form of confirmation that China is slowly emerging from its shut-down and restarting production having reported no new cases of the coronavirus in the country, apart from instances of infected cases entering the country - as such it has restricted entry to everyone except Chinese nationals and select officials.
Nonetheless seeing production restart in the world's second-largest economy is a welcome sign for the industry after car sales were obliterated in China during the lockdown. BMW, Daimler, Fiat Chrylser, Ford, Honda, Nissan, SAIC, Tesla, Toyota, Volkswagen and Volvo have all restarted production. PSA Group in its joint venture with Dongfeng Motor has even resumed output at its plant in Wuhan City - the epicentre of the coronavirus outbreak.
Meanwhile in Italy, Ferrari has just put out a press release announcing that subject to supply chain continuity, it hopes to resume production on 14 April. And Volkswagen expects the car market in Germany to stage a recovery in the Summer months. VW brand's sales and marketing chief, Juergen Stackmann, told the Frankfurter Allgemeine Zeitung, that whilst he does not expect COVID-19 to be completely eradicated by then, he believes that society will adapt and some level of normal routine will return.
"The standstill cannot last longer than Summer. Society and the economy cannot withstand that. We must learn how to live with the virus." VW is looking into new rules to ensure factory workers can keep their distance from each other on the production line and has even come up with a temporary redesign for its logo to reflect social distancing. Audi also separated out the four rings on its iconic logo.
Some car manufacturers are making efforts to become active participants in the war against the virus, in a previous story we mentioned the McLaren Automotive, Nissan and Formula 1 teams are working on producing medical ventilators and Fiat Chrysler is producing additional face masks in Asia.
Most recently MG Motor UK and its dealer network announced that it is supplying 100 electric MG ZS Electric cars to NHS agencies across the UK 'for use by our NHS heroes'. The cars will be supplied via MG’s nationwide dealer network for up to six months, completely free of charge. The first six cars have already been supplied to Lancashire and South Cumbria NHS Trust by MG dealer Chorley Group.
A brilliant effort and we look forward to hearing of more manufacturers following suit in this national time of need. Stay tuned to Motoring coverage on British Asia News for continuing updates on the situation.