It was less than three weeks ago that a very confident Peugeot boss appeared in the Paris suburb of Rueil-Malmaison before the press. “If this turmoil continues, Peugeot will be in a much more robust condition than our competitors,” exulted Carlos Tavares. His logic at the end of February: The Peugeot Group, to which Opel now also belongs, mainly produces in Europe, but in China, the country of the Corona epidemic, production is hardly worth mentioning, at most a few hundred thousand vehicles a year , a few percentage points on the balance sheet, nothing more. And now?
“Anyone who feels they are a winner in this crisis thinks too shortly,” says Jochen Siebert, managing director of the consulting company JSC Automotive in Shanghai. “A month ago, China was the problem child of the auto industry, but at the moment it is hope.” While Opel and Volkswagen in Europe are closing their plants, car dealerships are closing and major sales fairs have been canceled, business in the People’s Republic, the largest car market in the world, is gradually starting up again. “Since March 13, all factories in the country have been running,” says Siebert. “Honda was the last manufacturer to ramp up production in Wuhan.” So even in the epicenter of the pandemic they are working again.
Germans hope for relief
China could become a relief, especially for German companies. With more than four million cars sold, Volkswagen is the largest manufacturer in the People’s Republic. The group sells almost 40 percent of all cars in China. Daimler no longer sells S-Class sedans in any country in the world. And BMW even decided to become the majority owner of its joint venture in northeastern China in 2022. In total, German car manufacturers and suppliers in China make more than 150 billion euros in sales each year. That’s 600 million euros a day – and 60 million euros in profit. That was at stake.
Sales in February were down 80 percent compared to the same month in the previous year. It is even more impressive if you look at the mess in absolute numbers. Only one is enough: 4909. According to the Chinese Automobile Association, just as few cars were sold in the People’s Republic in the first 16 days of February. 4909 vehicles in what is actually the largest car market in the world. That makes an average of 307 pieces in 24 hours. Statistically speaking, 307 cars in China are otherwise sold every seven and a half minutes. But nobody bought. The car dealerships were closed, people were entrenched in their apartments and houses, like now in Italy, Spain and also in France.
Production in China should actually have started again in mid-February. “However, it turned out that it is easy to quit, but much more difficult to start again,” says auto expert Siebert. First of all, the workers were absent from the factories; due to travel restrictions within China, most of the Spring Festival employees, many of whom had spent in their home provinces, were unable to arrive on time in the first few weeks of February. All those who arrived on time had to go into quarantine for two weeks. Only then could production be started up again slowly.
Car makers made masks themselves
Factory managers became crisis managers overnight. How do you get a new breathing mask per day for every worker on the line? Where do you buy tons of disinfectant? And what happens if the plant is infected again? Some companies started making masks themselves in an emergency. The electric car manufacturer BYD from Shenzhen in southern China has become one of the largest mouthguard manufacturers in the world.
However, it is still far too early to speak of the end of the crisis in China. According to data from the Chinese automobile association, production is currently around half the capacity. “And it will stay that way for a while,” predicts Jochen Siebert. All factories are at the start again, but not all suppliers. In particular, medium-sized companies, which are often subcontractors of the third or fourth degree, have not yet managed to resume production. «Many of these companies live from hand to mouth. A two-month break was probably too much for them, in the worst case they are insolvent, »says Siebert. «All manufacturers are currently examining their supply chains in China, where are the weak points? What’s up again? » And also: What will have to change in the future?
A few weeks ago there was chaos in China. Containers piled up in many harbors, customs released nothing because there was a shortage of staff; in addition, almost every provincial administration had its own health regulations that changed on a daily basis. Once a container was in the country, the next problem started. How do you get him to the factory when there are no truck drivers left because they have to be quarantined every 14 days as soon as they cross a provincial border? In times of need, some managers tried to smuggle important components in their suitcases from Europe into the country. “The consequence must be that supply chains will become more transparent and shorter in the future,” says Jochen Siebert.
Created: 03/18/2020, 10:45 AM
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