Coronavirus Deals Fresh Blows To 6 Car Companies

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on Feb 17, 2020
Updated: Apr 3, 2020
  • Shares of Honda, Fiat Chrysler, and Hyundai tumble on coronavirus fears
  • Hyundai’s three day halt expected to cost the South Korean company around $500 million
  • Fiat Chrysler halts production in Serbia, may take up to four weeks until full operations resume

The coronavirus has continued to spread in Asia as the latest death toll has now climbed to 1,775, with more than 70,000 infected. As a result, these six car manufacturers announced new measures that will impact their overall output and most likely their first-quarter earnings.

Honda

First, Honda Motor announced that it will postpone the restart of its plants in Wuhan, where the outbreak virus is believed to have started, by a week following a request from the local government.

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Honda had initially planned to restart the car production today, however, the Japanese company has been forced to extend the halt for an additional week or even later than February 24. The extension will impact all three plants in Honda’s possession in Wuhan, while four other car factories in China will resume operations today.

Shares of Honda dropped around 3.5% since the coronavirus outbreak in mid-January.

Hyundai

Hyundai, the world’s fourth largest automaker, has been forced to extend the halt in one of its five countries – South Korea, by an additional three days – from February 18 to February 20 – due to a virus outbreak.

Hyundai’s Ulsan factory is considered to be among the largest in the world with five factories on the site making 1.4m units a year. Some analysts believe that a three-day halt will cost Hyundai an additional $500 million.

Furthermore, Hyundai has become the first car company to suspend production due to component shortages from China.

Unlike Honda, Hyundai stock price gained more than 17% since mid-January.

Fiat Chrysler

The Italian-American company joined its competitor from Asia in having to deal with coronavirus consequences by temporarily halting production in its factory in Kragujevac, Serbia.

Similarly to Hyundai, Fiat Chrysler (FCA) is struggling with componentes for its cars as it becomes the first European car maker to halt production due to a virus outbreak.

“Due to the availability of certain components sourced in China we have rescheduled planned downtime at the Kragujevac plant in Serbia [and] we’re in the process of securing future supply of those affected parts,” the FCA spokesman said.

The FCA Srbija, a joint venture between Fiat and the Serbian government, builds its 500L model in Serbia.

Previously, the company’s CEO said that the component shortage can hurt output in “one of European plants” by two to four weeks.

Fiat stock price decreased more than 4.5% since the coronavirus outbreak.

Nissan

Similarly to Hyundai, Nissan became the first Japanese automaker to halt the production in its native country due to car parts shortage. The company’s plant in Fukuoka, southwest of Japan, will see half of its output decreased on February 24th, while another production line will be stopped today.

Nissan is aiming to restart production in Hubei, China, but they ultimately rely on instructions from the Chinese government.

“We will follow the policy of local authorities,” Nissan official said.

Shares of the Japanese company lost almost 22% in the last five weeks, and its problematic co-existence with Renault is not helping the stock, which is trading at an 11-year minimum.

Toyota

Despite reports from last week that Toyota plans to resume operations in all plants in China this week, the world’s largest car producer said it will only partially resume operations in two plants in China.

“The safety and security of our team members, suppliers and stakeholders continues to be our top priority,” the company officials said earlier.

The plant in Tianjin is expected to resume its work today while the factory in Chengdu will return to normal functioning on Monday, Feb 24.

“As we will only know the situation of local parts makers when we resume operations at our factories, we want to operate them carefully with safety the top priority,” Toyota President Akio Toyoda said.

Toyota owns and operates 12 factories in China. Shares of the company are trading at the same levels since mid-January.

Mazda

Mazda has joined Toyota in “partially” resuming operations in its Nanjing (China) plant, five days after it had initially planned.

The factory, located in Jiangsu Province, will have a limited output due to shortage of workers and parts. Mazda’s other factory in China, more specifically in Changchun, is not scheduled to restart this week. These two factories employ around 3,000 workers.

The Japanese company said it plans to use spare and reserve parts for the time being. Moreover, operations at its factories in Japan will be hit as well due to a halt in production of some of its models.

Shares of Mazda trade at the lowest levels since September last year, after a drop of nearly 8% in the last five weeks.

Summary

Six major car manufacturers have been dealt fresh blows from the coronavirus outbreak in China as they are forced to temporarily suspend the car production, mainly due to a car parts shortage.

Shares of Nissan, Mazda, Honda, and Fiat Chrysler have moved lower since the first coronavirus death case was reported on January 13. The Hyundai stock price still appears immune to manufacturing troubles of the South Korean company, while Toyota stock price is unchanged compared to mid January.

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