By William Boston
When China's economy crashed early this year, Western
manufacturers with a strong presence there suffered.
Now, as China gradually reopens for business, that presence is
boosting auto makers including General Motors Co., Volkswagen AG,
Daimler AG's Mercedes-Benz and BMW AG.
Daimler finance chief Harald Wilhelm said this week that sales
of the company's Mercedes-Benz luxury cars would continue falling
in Europe and the U.S. through April. But sales rebounded in China
last month, marking the beginning of a recovery that he said would
help Mercedes post a profit in the first quarter.
"We see early signs of recovery in China," Mr. Wilhelm said on a
conference call. He said Daimler's March car sales in China were
nearly at the same level as a year ago, when Mercedes sold 61,913
passenger cars in China.
"At the end of March, our operations in China were already fully
normalized -- including the complete supply chain," he said.
The comments echo the more optimistic tone that auto makers,
auto suppliers and some other manufacturers have expressed about
China recently, as March data emerged.
Still, consumer demand globally is expected to remain weak. IHS
Markit has downgraded its outlook for world-wide auto sales this
year to 78.8 million vehicles, a 12% drop from last year,
"considerably worse than the two-year, peak-to-trough decline of
8%" during the recession of 2007-09.
Official March data on new car sales in China, due later this
month, are expected to show that the industry overall sold about
one million new vehicles last month, bouncing back from a 79% drop,
to 310,000 vehicles, in February, said Stephan Wöllenstein, chief
executive of Volkswagen Group China, in an interview.
"March was good," Mr. Wöllenstein said. "I'm cautiously
optimistic that we will be back at the production levels of the
previous year by June -- as long as there is no interference."
Volkswagen said Wednesday that to support ramping up its Chinese
factories, it would bring back 1,700 workers at its components
factories in Germany after Easter.
Even as production resumes, industry leaders and analysts say,
the Chinese government should provide more incentives to lift
consumer demand. Fresh outbreaks are possible, and companies are
struggling to get migrant workers who left cities in January to
report back for duty.
"It's going to take some nurturing," said Mark Fulthorpe, a
manufacturing analyst at IHS Markit.
Executives say China's tenuous recovery could still help offset
losses now mounting in Europe and the U.S. Daimler said Wednesday
that it was extending its European shutdown until April 30.
"In a way, now China is carrying the load for many industries,"
said Jörg Wuttke, president of the European Union Chamber of
Commerce in China.
GM operates 15 assembly plants in China, including two in Hubei
province, where the new coronavirus was first detected. When Wuhan
was locked down, GM couldn't produce vehicles there. GM said it
reopened its plants in mid-March, shortly after Beijing's decision
to lift restrictions and get people back to work. GM declined to
disclose the status of production at its plants in China.
Japanese auto maker Honda Motor Co. operates a joint-venture
plant in Wuhan with Dongfeng Motor Group. The plant was shut down
in January and resumed partial operation in early March.
Under a barrage of restrictive working conditions to prevent new
infections, including taking the temperature of everyone who enters
the plant and keeping workers 6 feet apart, the plant has returned
to precrisis production levels, the company said this week.
The global choreography of lockdowns and cautious reopenings
could increase the already significant weight of the Chinese market
for those Western companies that have a sizable foothold there.
This is especially true for auto makers, which were struggling with
tepid growth long before the pandemic.
Amid the transition -- as China ramps up activity, while Europe
and the U.S. remain in an induced economic coma -- some experts
think global auto makers such as GM and Volkswagen, the world's
biggest by sales, could generate up to half of their total new car
sales in China this year, said Ferdinand Dudenhöffer, director of
the Center for Automotive Research at Duisburg University.
"Whoever has a strong position in China is among the winners,"
said Mr. Dudenhöffer.
Christina Rogers in Detroit contributed to this article
(END) Dow Jones Newswires
April 09, 2020 07:44 ET (11:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.