This week, major news networks reported that the widespread effects of the COVID-19 outbreak could have a lasting impact on global automotive industry production. Automotive manufacturers from around the world are dependent on parts from China to keep their supply chains moving. The outbreak will have lasting impacts on production in Asian countries such as Korea, that rely heavily on China for share of parts.
The question remains, will the North American automotive industry feel the same impact as those around the world?
DuckerFrontier’s automotive and materials experts are closely monitoring implications for the global automotive industry supply chain. We see a significant share of aftermarket automotive parts sourced from China for a broad spectrum of applications: ware-based parts like brake pads, rotors, wipers, and other replacement parts including trim, electronics, motors, and powertrain.
North America is not heavily dependent on components from China for OEM (original equipment manufacturer) automotive production, though risks still exist with parts that have the potential to disrupt some specific vehicle trim level production. DuckerFrontier’s automotive industry experts outline the risks that could have the largest impact on your business:
- Cast aluminum wheels, with over 80% penetration for North American produced light vehicles, are most directly implicated, especially as over 50% of all cast aluminum wheels are imported from China.
- PCB (printed circuit boards) and LCD (liquid crystal display) – increasingly used for instrument clusters and infotainment screens – are at risk as China has a significant share of the global supply chain.
- Given the large volume of inventory, most carmakers have dual-sourcing possibility for most parts which may ease the pressure for certain OEMs and suppliers but will create bottlenecks for the whole industry.
- The risk of production suspension is dependent on the current inventories. As Chinese factories are expected to start over in a matter of weeks, emergency logistics can take over to avoid any disruption in production.
Our team of experts are closely monitoring the coronavirus’ impact on China’s economy and business environment. Subscribe to The Lens, our weekly newsletter covering the latest global events impacting your business and our most up-to-date coverage on COVID-19.
DuckerFrontier’s Automotive & Transportation team is at the forefront of key trends impacting the industry. How can we help you deliver the best performance for your business in 2020? Contact us to connect with an industry expert.