GlobalData predicts caution from Honda and Nissan

In the wake of coronavirus shutdowns at Nissan and Honda’s manufacturing factories in the Hubei province of China, the two companies have announced that they will resume manufacturing operations.

According to David Leggett, the Automotive Editor at GlobalData, the news is welcome, especially considering that China is currently the world’s largest car market and industry. However, Leggett predicts that despite the return to work, the crisis in China is not yet over. As such, he expects to see extreme caution from both OEMs moving forward, especially amidst concerns that having workers go back too soon could cause a second wave of the virus in the province.

“Both companies will be proceeding cautiously,” Leggett says in a recent press release. “They have to establish where they are with lower demand, stock levels of finished vehicles and components, and also the robustness of the supply chain and future supplies of critical parts. It will be many weeks before they will resume capacity utilization approaching anything like normal levels.”

While lost sales are a huge issue for both Nissan and Honda, it’s particularly problematic for Nissan, which was experiencing pre-pandemic pressure to increase its bottom line. Leggett predicts that Nissan will experience a poor cash-flow position which will reduce capital that the company desperately needs for investment. Leggett also expects that Nissan will experience increased pressure to find other areas to make cuts.

Ultimately, the trajectory of the COVID-19 crisis will be critical to the future health of the population, as well as the financial health of Nissan and Honda. “Over the next few months, much depends on the rate of progress in tackling the public health crisis,” Leggett says. “If the return to work in China is too fast, there could be another wave of coronavirus infections and another headache for the authorities, as well as further setbacks for the economy later on.”

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