Impact of Chinas COVID-19 Outbreak on the Automotive Industry and - - PowerPoint PPT Presentation

Impact of China’s COVID-19 Outbreak

• n the Automotive Industry and Recovery

May 2020

Presentation by Philippe Thegner, Senior Advisor, Automobility Ltd. & Chairman of AASA China Aftermarket Forum

Connect with Philippe:

Overview of COVID-19 outbreak in China Back to work and Progressive reopening Status for the automotive industry and its recovery

Automobility Ltd

China flattened the curve in 4-6 weeks thanks to aggressive policies aiming at breaking the chain of transmission

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90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000

• Dec. 29
• Jan. 12
• Jan. 26
• Feb. 09
• Feb. 23
• Mar. 08
• Mar. 22

Mar.29

• (Dec. 29) An

epidemiological survey began in Wuhan

• (Jan. 22) Central and local

governments promised to cover all COVID-19 medical expenses for confirmed cases

• (Jan. 27) Central and local governments will also

cover all medical expenses of suspected cases

• (Jan. 26) 2nd emergency specialty field hospital

began construction in Wuhan

• Chinese army started taking over COVID-19

designated hospitals in Wuhan

• (Jan. 25) 30 provinces and municipalities

launched Level-1 Emergency Response, incl. lockdown measures

• (Jan. 24) Army medical forces, Shanghai,

Guangdong Provinces sent the first medical teams to Wuhan

*Note: Incl. facial masks, test kits, protective gears and eyewears, infrared thermometers, etc. Source: Desktop research, Automobility analysis

• (Feb. 01) 730,000 test kits, 9.6 million masks and

20,000 protective gowns are produced nationwide daily

• (Feb. 02) 1st emergency hospital put in use with 1,000 beds in negative-pressure wards
• (Feb. 03) Wuhan announced to retrofit convention centers and stadiums into mobile cabin

hospitals dedicated for mild-case patients

• (Feb. 08) 2nd emergency hospital put in use with 1,600 beds in negative-pressure wards
• Central government promised manufacturers to purchase to all extra-produced key medical

supplies*

• (Mar. 24) 27 provinces and municipalities

downgraded the level of Emergency Response

• (Feb. 29) 1.7 million test kits, 116

million masks and 330,000 protective gowns are produced nationwide daily (# of confirmed cases) (Date)

• 1st emergency specialty field hospital began

construction in Wuhan

• (Jan. 23) Lockdown began in Wuhan
• Wuhan started to use hotels and student dormitories as quarantine zones for close contacts
• (Feb. 05) All confirmed and suspected cases are strictly required to be moved into hospitals
• (Feb. 13) All suspected cases with COVID-19 clinical symptoms and featured CT

images started to be categorized as confirmed cases

• (Mar. 25) Hubei Province started to remove travel

restrictions except for Wuhan

• Wuhan announced to remove lockdown by Apr. 08

Policies released Resource Summoned

• (Jan. 20) Person-to-person transmission of

COVID-19 is confirmed

OVERVIEW OF COVID-19 OUTBREAK IN CHINA

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China’s strict lockdown was made possible by the collective efforts of all citizens and millions of grass-root civil workers

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Source: Desktop research, Automobility analysis

 Strict traffic controls in and out of the regions  14 days quarantine for people: who travel from key regions, and who had potential contact with infected persons or persons under medical assessment  All non-life-essential businesses and facilities are shut down until further notice (re-opened under strict supervision since Feb. 10)  Mandatory mask-wearing and temperature checks in public  Access restrictions (to non-residents) and exit controls in residential compounds and villages  Partial suspension of transportation services, incl. buses, ride-hailing, railways, flights, and ferry  All transportation services incl. buses, railways, flights, and ferry services are suspended, except for medical or life- essentials  Non-essential vehicles on urban and rural roads are banned; highway exists are closed  All non-life-essential companies, incl. manufacturing plants, in Hubei Province are shut down until further notice  All non-life-essential facilities are shut down  Residential compounds and villages are under complete lockdown management Partial lockdown for provinces and municipality but Hubei* Complete lockdown for Hubei Province

*Note: Wenzhou, Zhejiang Province were under complete lockdown from Feb.4 to Feb. 19

Shanghai Xintiandi Beijing International Airport Foxconn Dormitory

Empty factories, city centers and transportation hubs during the lockdown

OVERVIEW OF COVID-19 OUTBREAK IN CHINA

Automobility Ltd.

Containment measures have “flattened the curve” with progressive reopening

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Source: Johns Hopkins University, Automobility Analysis

• Measures in Asia include:
• Mandatory mask-wearing in public
• Temperature check at every gate
• Tracing through QR health code
• Widely available, free tests
• Isolation of infected people and close

contacts

• Strict self-quarantine and early social

distancing Containment measures helping flatten the curve in Asian countries

• Restart business on Feb 10 outside Hubei with work from

home during first 2 week for white collar. Partial work from home on week 3. everybody back to work in office at beginning of March. Wuhan reopen early April

• Focus asymptomatic and imported cases since March

OVERVIEW OF COVID-19 OUTBREAK IN CHINA

Cumulative COVID-19 Cases in Selected Countries (as of Apr. 19, 2020)

(# of confirmed cases)

The U.S. Italy Spain France The U.K. Iran China Germany 400k 200k 600k 800k

• Apr. 19
• Feb. 02
• Feb. 16
• Mar. 01
• Mar. 15
• Mar. 29
• Apr. 12

Business reopening Wuhan reopening

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Automotive production in China is gradually recovering to pre-pandemic level

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• By the end of Mar., all tier-

1 suppliers in Wuhan have

• btained work resumption

approvals, and reached 95% work resumption rate, largely relieving the supply chain risk resulted from factory shutdown in this region

• Auto parts suppliers with

significant

• perations

in Wuhan, Hubei Province, include Bosch, Schaeffler, ZF, Faurecia, Valeo, Webasto, etc.

97% Feb.19 Mar.28 60% Feb.19 Mar.28 82% 50%

Source: MIIT, desktop research, Automobility analysis

Work Resumption Rate Employees Returning Rate

“…As of Mar. 28, the capacity utilization rate of the automobile industry nationwide has reached the same level as that of the same period last year...” —— Xin Guobin, Vice Minister of the MIIT Chinese Automotive Industry Supply Chain in Wuhan “…As of Mar. 28, the capacity utilization rate of the automobile industry nationwide has reached the same level as that of the same period last year...” —— Xin Guobin, Vice Minister of the MIIT

IMPACT ON GLOBAL AUTOMOTIVE INDUSTRY

Automobility Ltd.

Back to work: Establish pandemic response team at factory level

7 Source: Lear IMPACT ON GLOBAL AUTOMOTIVE INDUSTRY

• Single

access

• Social

distancing

• Temperatur

e check

• Mitigation

measure

• Develop

protocol to ensure employee wellness aligned with global EHS

• Audit
• Manage

periodic disinfection according to protocol

• Ensure

compliance

• Manage all

pandemic related communicatio n and training in coordination with global com and HR

• Direct and

centralized procurement to secure all necessary supplies

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Back to work: Preparation for entrance

8 IMPACT ON GLOBAL AUTOMOTIVE INDUSTRY

1. Security Check: all employees must enter to the plant by the same entrance. 2. Specify place to take temperature: shall be taken before entrance to plant. Not allowed working with temperature over 37.5 3. Health QR code check: Only green QR code allowed to work, Yellow code shall remain in quarantine for 7 days, red 14 days 4. Keep the distance of 1.5m while waiting 5. Avoid crossing flow between 2 shifts, extend overlap timing for shift change 6. Specify area for mask delivery and for waste collection point for potentially contaminated waste 7. Specific area to address suspicious case that would be identified during the shift 8. Generalize and make workers aware of “barrier gestures” 9. Avoid physical contact avoid handshake and substitute by a smile or head move

• 10. Leave the doors and turnstiles open if possible to avoid having to push them
• 11. Space for hand washing must be designated

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Back to work: General rules

9 IMPACT ON GLOBAL AUTOMOTIVE INDUSTRY

1. Around 1.5m social distance to be secured 2. Mask is mandatory in the workshop and meetings, 1 mask per employee per day, N95/FFP2 3. Frequent hand sanitation and gloves if contact required or cleaning wipes for button (lift) 4. Stop utilization of air conditioning in closed area during meeting 5. Mandatory use of safety glasses in the workshop to prevent virus transfer though eyes 6. Self check for potential symptom and report to supervisor immediately if issue

• Maintain meeting to a maximum of

designated capacity for each room

• Always respecting social distance
• Secure ventilation between meeting
• Cleaning and disinfection before and after

meetings

• Follow diagram and specific layout for

seating

Meeting Canteen

• Clean and disinfect before break/dining
• Seating following social distancing 1.5m
• Canteen table must be cleaned and

disinfected before every batch of people

• Set schedule to ensure social distance
• Remove common coffee makers in office
• Respect social distance on the auto

dispenser + Get cleaning wipes for buttons

• Lunch boxes are provided. Office

employee can eat at their desk.

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10 IMPACT ON GLOBAL AUTOMOTIVE INDUSTRY

• Use of locker room is not recommended
• Access to locker room shall be
• rganized to avoid accumulation of

large number of people. Capacity limit shall be defined

• Always respect social distance
• Limit maximum people in smoking area

to fulfil social distance of 1.5m

Locker rooms & smoking area Shift change meetings

• Social distance shall be respected
• Implement tool like sound amplifier in

case of communication barrier

• Get cleaning wipes nearby to clean the

electronic and device shared elements

Transportation

• Reduce business travel to minimum and apply all governmental rules
• Restrict visits to strictly necessary
• Car: avoid more than 1 passenger
• Company bus: 1 person per 2 seat, cleaning and disinfecting shall be applied to the bus.

Use of hydrogel before entry of the bus is mandatory

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Impact on economy: Chinese economy recorded a 6.8% contraction in Q1

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China’s GDP YoY Growth Rate （1992 - 2020Q1) China’s Economic Activity YoY Growth Rate （Feb. 2019 - Mar. 2020)

1992 1996 2000 2004 2008 2012 2016 2020Q1 Financial Crisis

• 10%
• 5%

0% 5% 10% 15% 20%

Retail sales

• Q1 YoY change -19%
• March YoY change -15.8%, +4.7% from Jan.-Feb.

Industrial production

• Q1 YoY change -8.4%
• March YoY change -1.1%, +12.4% from Jan.-Feb.

Fixed-asset investment

• Q1 YoY change -16.1%
• March YoY change -9.5%, + 15% from Jan.-Feb.

Highlights

• According to CICC tracker, Q1 average capacity

utilization was only 65-70% for offline business, even though the work resumption rate topped >95% for large enterprises and ~80% for SMEs

• Meanwhile, demand decrease from rest of the

world will hit China’s industrial production and exports more severely in Q2

• Domestic demand is expected to be driven by

public sector investment and real-estate investment

Source: China’s National Bureau of Statistics, desktop research, Automobility analysis

• 20%
• 10%

0% 10% Feb. 2020 Mar. 2020 Feb. 2019 Apr. 2019 Jun. 2019 Aug. 2019 Oct. 2019 Dec. 2019 Retail sales Industrial production

IMPACT ON CHINA’S AUTOMOTIVE INDUSTRY

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Already in a multi-year decline, China’s automotive market has been especially hit hard by the outbreak

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Industry

• Continental (Mar. 5) : China light

vehicle production expects a 5%-10% fall in 2020 Trade Associations

• CPCA (Mar. 9): Trimmed the China

auto sales forecast to an 8% yearly decrease

• CAAM (Apr. 7): Lowered its pre-
• utbreak forecast to a 5% fall for 2020

auto sales, expecting a quick rebound Third-party Analysts

• CICC (Mar. 24): China PV sales is

expected to decline 12.5% in 2020

• S&P (Mar. 10): The overall China auto

sales would dip 5% in 2020

• Moody (Mar. 29): The auto market in

China would see sales fall 10% in 2020

Comments

Source: CAAM (China Association of Automobile Manufacturers), CPCA (China Passenger Car Association), Desktop research, Automobility analysis

Companies and institutions have adjusted their forecasts for Y2020 Chinese auto market, anticipating a whole year decline

IMPACT ON CHINA’S AUTOMOTIVE INDUSTRY

Segments YOY MoM

• Jan. 2020
• Feb. 2020
• Mar. 2020

Q1 2020

• Mar. 2020

Total

• 18.0%
• 79.1%
• 43.3%
• 42.4%

364.1% PV

• 20.2%
• 81.7%
• 48.4%
• 45.4%

365.8% CV

• 5.7%
• 67.1%
• 22.6%
• 28.4%

348.9% 17.9 19.7 21.1 24.4 24.7 23.7 21.4 2.9 4.1 3.8 3.5 3.7 4.2 4.4 5 10 15 20 25 30 25.8 2018 2013 4.3 2017 2014 2015 2016 2019 3.7 Q1 2020 0.8 28.0 28.9 22.0 23.5 24.6 28.1 +7.1%

• 2.8%
• 8.2%

CV PV

Overall China Auto Industry Sales Segments (2013 – Q1 2020, million units)

• 5%
• 12.5%

24.5 22.5

?

Automobility Ltd.

Chinese automotive market is showing positive sign of a steady recovery

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• Daily average sales on a weekly

basis improved steadily over the eight weeks in February and March

• YoY change in daily average sales
• ver the same period narrowed

from -96% to just -24%

• The market is expected to receive

additional policy boosts

• The State Council on March 31

extended subsidies and purchase tax exemptions for NEVs by another two years until the end of 2022

• At the regional level, an increasing

number of cities, including Beijing, Hangzhou, Guangzhou, Changsha and Foshan, have announced stimulus measures such as cash incentives or additional license plate quotas to spur sales.

Highlights

Source: CPCA, China Automotive Review, Automobility analysis

IMPACT ON CHINA’S AUTOMOTIVE INDUSTRY

China Average Daily Retail Sales of PVs (Feb. 2020 – Mar. 2020)

811 5,411 16,666 21,696 25,842 53,897

• 100
• 90
• 80
• 70
• 60
• 50
• 40
• 30
• 20
• 10

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 Wk 4 Wk 4

• 89%
• 96%
• 63%
• 83%

Wk 1 Feb.

• 24%

Wk 2 Wk 3

• 50%

Wk 1 Mar.

• 44%

Wk 2 4,101

• 40%

Wk 3 16,500

• Avg. Daily Retail Sales

YoY Change (%) (RHS) (LHS) (units)

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Contact us

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Please find below contact details for our offices in Shanghai or contact us at info@automobility.io

Tel Aviv

Automobility Limited 101 Rokach Blvd, Tel Aviv, 6153101, Israel Tel +972 54 5424074

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Automobility Ltd. Corporate Avenue One, No.222 Hubin Road Shanghai China 200021 Tel +86 139 1757 7148

Hong Kong

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