Auto industry will look to China for rebound insights – GlobalData

As the Chinese Government announces it will maintain subsidies for electric vehicles and plug-in hybrids, an indication that it will support the industry in recovery, David Leggett, automotive analyst at GlobalData, says “all eyes will be on China, being the first country hit by the crisis and the first to attempt to navigate a way out.”

He continues: “A gradual return to work in Hubei province – the original source for the virus – is certainly a very positive sign. However, manufacturing firms have to contend with a still fragile workforce and reactivating stalled supply chains. It will be a while before they can get anywhere near to normal operations.

“Government support should help the sector in the early stages of recovery.

“On the upside, some sales rebound is now in prospect. Volkswagen this week said it expects Chinese passenger vehicle sales to rebound to around 1 million units in March from a low of around 240,000 units in February – when the market declined by over 80 per cent.

“A significant rebound to demand and manufacturing in China will boost industrial confidence around the world over post-COVID-19 recovery prospects later this year.

“However, the authorities in China will also continue to be very wary of the dangers of a further major COVID-19 outbreak and the damage to confidence and the economy that would bring.”

Threat to China’s battery sector dominance

GlobalData also predicts that the COVID-19 outbreak will impact China’s green energy sector, including renewable energy sources, battery energy storage, electric vehicles (EVs), and renewable heating and cooling.

Sneha Susan Elias, senior power analyst at GlobalData, comments: “China’s attempt to fight the coronavirus outbreak has led to delayed production across a number of battery production facilities located in key corona virus-hit provinces and is expected to lower the output of Chinese battery manufacturers by around 26 GWh in 2020.”

The supply constraint will also have an impact on the global EV markets along with energy storage projects, causing project delays or a rise in battery prices. This situation is different from the conventional narrative about grid storage projects and EVs reaping benefits from steady decrease in battery price.

Globally, carmakers are looking for independence from the current supremacy of Chinese battery manufacturers and are aiming to secure their own battery supply chains.

Elias concludes: “The industry’s over dependency on China has been showcased recently with the coronavirus outbreak leading to disruptions in the supply of components. China itself is expected to take a beating on production of around one million vehicles. The country exports around US$70bn worth of car parts and accessories worldwide, with nearly 20 per cent going to the US.”

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