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)

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