Sector News

COVID-19: Europe’s automotive production grinds to a halt

March 19, 2020
Chemical Value Chain

Virtually all European vehicle manufacturers are closing down operations because of the coronavirus disease 2019 (COVID-19) virus, shutting off an important outlet for the chemical industry.

Analysts estimate that the automotive industry accounts for 11–12%, directly and indirectly, of chemicals production, although the proportion is higher for some companies.

BASF, with its major production base in Germany, for example, reckons that between 15% and 20% of its sales are ultimately to the worldwide automotive industry. Germany is particularly exposed as it accounted for over 29% of Europe’s 19.2 million vehicle production, 20% of the world total, in 2018. The European automotive sector provides direct and indirect employment to around 14 million people.

Volkswagen (VW); Nissan; Ford; Daimler; Fiat Chrysler; BMW; Renault; and PSA, which owns the Peugeot, Opal, and Vauxhall brands, have announced they are temporarily stopping production in Europe to combat the spread of the disease and because they are struggling to receive essential components. On Wednesday Toyota, Honda, and BMW stopped their assembly lines in the UK, leaving Jaguar Land Rover (JLR) as the only large carmaker currently still operating in the country, and JLR is soon expected to announce a temporary halt to production. Even luxury brands, such as Ferrari and Maserati, and niche manufacturers such as Volvo, owned by China’s Geely Group, are pausing production.

VW CEO Herbert Diess said earlier this week that the closures will last for at least two weeks. “The [COVID-19] pandemic presents us with unknown operational and financial challenges. We will succeed in overcoming the [COVID-19] crisis by pooling our strengths and with close cooperation and high morale in our group,” he said.

BMW’s CEO Oliver Zipse said on Wednesday that the company will shut down its European car factories and the Rosslyn factory in South Africa. Speaking on Wednesday, Zipse added that the interruption was expected to last until 19 April. BMW said its profits this year would be significantly lower, given that it was shutting factories that accounted for half of the 2.6 million cars it built in 2019.

In the US, Ford, General Motors, and Fiat Chrysler said they will temporarily shut down production, and today, Hyundai Motor and Kia Motors, South Korea’s two largest automakers, said that their US plants stopped operations, following their American rivals.

By Natasha Alperowicz

Source: Chemical Week

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