Several sectors are affected by a slowdown in activity, due to the quarantine and containment measures put in place to limit the spread of the coronavirus.
The Covid-19 epidemic continues and the global economy is coughing. If the fate of patients and populations prevails, an increasing number of companies are suffering from the measures put in place to try to limit the spread of the coronavirus. The Chinese Minister of Commerce has already warned that the country’s exports and imports would drop significantly in January and February. Some companies have the calculator to measure the financial consequences of the disease.
China’s automotive sector running out of steam
The Chinese automotive sector is in turmoil: sales collapsed by 92% between February 1 and 16 (4,900 cars against 60,000 last year), according to the Chinese Federation of manufacturers of individual cars. “Across the different regions, very few dealers were open and attendance was extremely low, because only customers with urgent needs buy a vehicle in times of epidemic”, Observes the organization.
The province of Hubei (center), where the epidemic spread and which has been cut off from the world for a month by a drastic sanitary cordon, is also a major center of the Chinese automobile industry. It is the headquarters of Dongfeng, one of the largest Chinese manufacturers. A large number of equipment manufacturers are also located there, which raises fears of serious disruptions in the sector’s supply chains. In addition, other global manufacturers have had to slow down their activities, such as Toyota, General Motors, Volkswagen or Hyundai.
Leaded air transport
The International Air Transport Association (Iata) estimates that losses for Asian airlines alone could amount to almost $ 28 billion this year. The organization fears the “first global drop” reservations since 2008-2009. The year 2020 will be “very difficult for airlines”, Warns the general manager of Iata, Alexandre de Juniac.
According to the association, which brings together 290 airlines, the net drop in the number of passengers compared to 2019 could be 8.2% in the Asia-Pacific region. Several airlines, including Air France, British Airways, Air Canada, Lufthansa and Delta, have also suspended their flights to mainland China due to the epidemic.
Sea freight is pitching
Sea freight is also pitching due to the complete shutdown of several Chinese ports. In addition to the immediate logistics problem, the slowdown in Chinese demand in the short (and perhaps medium) term, because the country alone represents “around 35% of dry bulk imports by sea in the world”, says Arctic Securities analyst Lars Bastian Østereng.
Willy Shih, a professor at Harvard Business School, says he visited one of Shenzhen’s huge container terminals, where traffic was almost non-existent. “People will start to realize the situation when shipments of goods, parts or components do not arrive”, he explains in the Harvard Gazette (in English).
Apple production and sales affected
The effects of the epidemic are also being felt on global businesses. The Apple group, affected by falling sales forecasts, warns that it will not meet its targets due to the epidemic in China. Apple could also suffer a drop in production, because the brand has many factories in the country, in addition to achieving a significant part of its turnover.
The example of the apple brand illustrates the place of China in the world economy. The country manufactures electronics and toys, but also many consumer products and pharmaceutical ingredients. Dun & Bradstreet, a company specializing in commercial data, estimates that at least 51,000 companies have one or more suppliers in the most affected area of China. This concerns at least five million companies for the zone concerned at level 2, according to the study cited by the American chain CNBC (in English).
French groups penalized
In France, several large groups are also at risk of being penalized by the epidemic. This could have a “negative impact of 300 million euros” on the first quarter turnover of Schneider Electric, announces the group finance director Emmanuel Babeau. China represents around 15% of its activity. Same situation for the Air France-KLM group, which assesses the impact between 150 and 200 million euros, which puts for “a gradual resumption of operations from April”. The Renault group lost more than 3% on the stock market, especially as its partner Nissan had to postpone the reopening of two factories in China.
Pernod Ricard, number two in the world for spirits, has lowered its annual operating profit target for the period from January to March. “All night clubs, all night bars are closed in China until further notice”, says CEO Alexandre Ricard. The cafes, hotels and restaurants that are open, “are quite empty [car] people are at home. ” In addition, companies like Publicis had to close their offices in China, while Technicolor reported delays in supply and Bouygues was forced to stop its activity in Hong Kong for two weeks.
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