Coronavirus in China to disrupt global auto supply chain: S&P

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Chennai (IANS) Credit rating agency Standard and Poors (S&P) on Thursday said the measures to prevent the spread of new coronavirus in China will disrupt the global auto supply chain.

In a report titled "The Coronavirus Dashes Recovery Hopes For Global Autos" the rating agency also said the measures may dash hopes of a mild recovery in China's auto industry.

According to the report, among automakers Volkswagen has the highest exposure to China as it manufactures vehicles and components at 23 sites in that country, representing nearly 40 per cent of the group's consolidated production.

"Among suppliers, we think Bosch will be particularly hard hit. With about 14 billion annual sales from China, China is Bosch's second-largest market, after Germany," S&P said in a statement.

"The coronavirus outbreak, which has triggered lockdowns in some Chinese cities and several auto plant closures, will likely depress Chinese auto sales below our previous base case for one per cent-two percent growth in 2020, although it is currently too early to quantify the full impact," said S&P Global Ratings credit analyst Vittoria Ferraris.

Production volumes in China had only just started to recover last November after a two-year decline.

"We estimate the current two-week production shutdown imposed in the Chinese province of Hubei will knock two per cent - four per cent off total annual production in the region, which is home to about nine per cent of the total Chinese auto production," Ferraris said.

The rating agency believes China may further extend shutdowns beyond Hubei to limit contagion risk, possibly affecting up to one-half of China's auto and auto-parts production.

"The coronavirus outbreak represents a material downside risk to our scenario for a mild recovery of the Chinese auto market in 2020, with no relevant mitigant on the radar," said Ferraris.

"While the Chinese market maintains its long-term attraction for most global auto manufacturers and suppliers, recent developments may contribute to turning 2020 into an ever more challenging year for global automakers and suppliers than we originally expected," she added.

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