But winter 2020 has delivered an abrupt shock by a highly contagious virus. Car and parts plants have been mostly idle for weeks.
Baidu’s AI-powered Migration Index indicates that only one-third of employees in major cities were back to work in the last week of February.
Demand for cars has nosedived. Sales in the first half of February were down 92 percent, according to the China Automotive Dealers Association. “It is not good to meet customers face to face,” a BYD dealer in Shanghai told me last week.
American companies are understandably shaken. My company, ZoZo Go, has never been busier. Since early February, we have gotten waves requests for support from supplier risk-management teams across the industry. They understand the need to find parts supply outside of China. A comment from one executive brought home the gravity of the situation: “We [are] ass-deep in this one.”
When will China get back to full production? Recovery will vary by region and by part. But late April is probably the most optimistic timing.
How can they diversify supply chains for the future? There is a delicate balance to strike. Companies need to remain engaged with China, a towering market that will continue to command respect.
At the same time, smart companies should move quickly to reduce risks to the supply chain.
The Jeep Wrangler offers one illustration of how a China-centric supply chain can go wrong: The Wrangler is assembled in Toledo, Ohio. But Wrangler’s steering gears are built 7,500 miles away in a factory in Wuhan, China — epicenter of the coronavirus outbreak.
Dealers in the U.S. are facing imminent risks, too. Chinese companies manufacture a huge number of replacement parts.
Amplifying the anxieties: uncertainty about the reliability of information coming out of China as the country battles the coronavirus.
