Global carmakers lose nearly $6 million daily for each plant shut down in Wuhan

The closures of plants in the epicenter of the coronavirus outbreak has cost foreign auto majors, including Honda, Nissan, General Motors and Renault, around $5.69 million in losses per day, according to Chinese state media.

“Some Wuhan parts suppliers now rely on stockpiles, but the stockpiles will run out soon. Another problem lies in the delivery network, which has not returned to normal,” an auto industry insider told the Global Times.

The city of Wuhan in Hubei province, from where the epidemic is believed to stem from, is one of China’s major auto hubs, hosting American, European and Japanese carmakers among others. In 2018, more than 1.7 million units of vehicles valued around 400 billion yuan ($57 billion) rolled off the production lines in the city.

As Wuhan has been on lockdown since late January, the facilities operating there and in neighboring areas had to put off the restart of production beyond an extended Lunar New Year break.

The Hubei-based companies won’t be allowed to resume operations before March 11, and even if the restrictions in the epidemic hit-area are not further prolonged, it will take foreign carmakers several more weeks to get back to normal, according to Li Kuan, a manager of the organizing committee of China (Wuhan) International Auto Parts Expo.

“Even after restarting production, it will also take roughly one month and a half for foreign joint ventures to bounce back to their full capacity as before the virus hit,” he said as cited by the Global Times.

The coronavirus has shown how much the global supply chain, including the auto industry, is dependent on China. This could possibly push global producers to look for backup suppliers, for example India or Thailand, so as not to lose so much money again and protect the brand, according to auto industry expert Lauren Fix.