Five percent drop in passenger car market predicted by Continental

Hannover-based Continental, one of the largest automotive parts suppliers in the world, says an already weak future for the industry is being made worse by Coronavirus.

Continental’s prediction, reported in today’s Financial Times, will make depressing reading for manufacturers in the sector. It says 2020 will be the third straight year of contraction since the global financial crisis of 2008.

Continental AG tyre factory Mittellandkanal Stoecken, Hannover
Continental AG tyre factory Mittellandkanal Stoecken, Hannover – courtesy of Continental AG.

Grim news for the automotive sector is nothing new, but it is the unexpected impact of Coronoavirus that is likely to turn a downturn into a crisis.

Continental says it anticipates car production to have shrunk by 10% in the first three months of this year, a severe correction caused by the shock to manufacturing in China, where the company employs 25,000 people and operates more than 50 production and R&D sites.

The impact on Chinese car production, Continental says, is likely to be in the region of 30%.

“The globally interconnected automotive industry will be impacted by turbulence arising from the Coronavirus epidemic, trade conflicts that remain unresolved, drastically more stringent emission regulations in Europe and the rapid digitalisation of business processes and products,” said Wolfgang Schäfer, Continental’s chief financial officer.

The immediate effect of the virus on supply chains is already well documented. UK OEMs JCB last week reported disruption to the supply of parts coming from China.  Jaguar Land Rover also suffered disruption.

The concern now is what will happen to supply chains in the longer term and the extent to which manufacturers, in the automotive sector and beyond, will have to start planning for a very different future to the one they might have envisaged only a few months ago.