Tesla’s re-engineering in China, autoindustry downstream aid upstream

Recently, the China Association of Automobile Manufacturers for 212 auto parts enterprises to investigate, affected by the outbreak, the vast majority of enterprises will have a certain loss of operating income. In this regard, Cui Dongshu, secretary-general of the Federation, said that for the automotive industry chain, because the survival of parts enterprises are highly dependent on the vehicle enterprises, and the majority of parts enterprises are small,smaller, less risk-resistant capacity, so the vehicle enterprises should give more support to parts enterprises.

Tesla’s return to work

With the exception of Hubei Province and some areas with severe outbreaks, most areas have set a resumption date of 10 February.

According to data provided by the Lingang New Zone Management Committee of The China (Shanghai) Free Trade Pilot Zone, 80 projects were ready to resume work in February, and the first batch of migrant workers will reach nearly 6,000.

In the area, including Tesla, SAIC and other enterprises, including nearly 100 automotive vehicles and industrial chain enterprises. Tesla’s Shanghai plant is scheduled to resume production on February 10, becoming the first auto maker in the country to resume work, while its auto parts company, Both, Isser,” and Automotive Safety Systems Co., Ltd. (“Both Wins”) is back in work on the same day.

Tesla's re-engineering in China, autoindustry downstream aid upstream

Shanghai Lingang has received a recent letter of intent from Tesla China to officially become a supplier of Tesla’s Model 3 and Model Y models, providing domestic Model 3 and Model Y with airbags, seat belts, steering wheels and components such as steering wheel controllers and window controllers.

First financial reporters from the person in charge of the acquisition of the company in accordance with the requirements of masks, disinfectants and other protective equipment, and in all the security measures complete, do their best to ensure normal production.

There was a marked escalation of anti-epidemic layout measures around the plant, with a large number of security at the factory gate to maintain order, while staff buses transported staff in single seats to prevent possible cross-infection. In addition, the factory informed that employees from key areas of the outbreak are required to be isolated at home, and require non-essential civilian positions in addition to the necessary positions may be arranged to work at home, in order to better respond to epidemic prevention and control requirements.

At present, the number of employees who are more than average is about 60% of the total number of employees. The above-mentioned leaders said that although the resumption of work, production capacity is difficult to immediately return to the level of previous years.

Tesla’s vice president of external affairs, Dolin, said on its social networking site last week that delivery, which appeared to be scheduled for early February after the Spring Festival, would be put on hold, and said it would try to make up for the delay before the outbreak improves.

Small and medium-sized enterprises are

In Yancheng, Jiangsu Province, about 300km away from the new area of Lingang, a small and medium-sized auto parts company that provides electronic components for Dongfeng Yueda Kia and other domestic Korean joint ventures and overseas Korean-funded vehicle manufacturers also ushered in the resumption of work days after the festival. Song Haitao, the company’s deputy general manager, told First Financial Reporter that in the past period of time, although the domestic vehicle factory is in a state of shutdown, but overseas vehicle manufacturers because they are still in production, so they have been repeatedly urged to start work, but also let them into the loss of overseas orders concerns. And because of the current market mask prices and out-of-stock, it is difficult to meet the local government regulations related to the resumption of work, in addition, because some areas are still in the “closed city” state, and some logistics enterprises are still in a state of suspension, and auto parts enterprises are more difficult to sell directly to the market, resulting in even the resumption of work, Some enterprises also face difficulttosty production, difficult to transport goods and other embarrassment.

In addition, Song Haitao also revealed that some countries’ customers have been playing to “prevent the spread of the epidemic” as the reason for refusing or delaying the acceptance of orders of goods, but also lead to the difficulties of small and medium-sized enterprises.

First financial reporters learned that in many provinces in the country, in order to ensure the safety of staff, for the resumption of work or not to implement the approval system. For many small and medium-sized enterprises, enterprises in the work stoppage need to bear wages and other related costs, so in order to ensure the flow of funds need to quickly resume work and start production, but because of the rising price of protective equipment, this also makes some small and medium-sized enterprises face greater difficulties.

Even parts companies that buy protective equipment and start work are not easy. Dong Ruiqing, general manager of an automotive components company in Changzhou Development Zone, Jiangsu Province, said that although the company has started work, but for a group of employees returning from specific areas to be isolated, in addition to the part of the city has been “closed”, so only 60% of production staff have resumed work, and the lack of test bench operators led to a serious impact on research and development projects, In addition, the number of drivers willing to ship has decreased as some provinces require a certain number of days to be segregated from returners from the provinces.

“It is estimated that the outbreak will reduce demand for new orders by 60% or more in February. Even old and overseas orders can be temporarily difficult to meet because capacity cannot be kept up immediately. Dong Ruiqing said.

Since then, due to the delay of the resumption of work by domestic auto parts enterprises, not only domestic vehicle manufacturers, some overseas vehicle factories have also been affected. Among them, because of the close distance between China and South Korea and the tendency of Korean car companies to rely more on the internal single supply chain, the Korean car companies bear the brunt.

Following Ssangyong Motor’s announcement, Hyundai, a group of Hyundai and Kia brands owned by Hyundai Motor Corp. of South Korea, is also facing a temporary shutdown due to a shortage of components such as electronic components from China.

Not only small and medium-sized parts companies, but even some large enterprises are not immune. Earlier, Wolkmar Denner, the global chief executive of the Bosch Group, had said that the outbreak of new crown pneumonia could affect Bosch’s global supply chain because of Bosch’s heavy reliance on the Chinese market. According to incomplete statistics, Bosch, Electric, Garrett and other world-renowned parts companies have factories in Oraround, and the resumption of this plant is still difficult to predict. Bosch China President Chen Yudong also told First Financial Reporter that for a large parts company like Bosch, if a factory stops production, as a blood vessel is blocked will affect the whole body, not only means that a product can not produce, it is likely to affect the overall industrial chain structure.

Automotive industry analyst Zhang Qiang believes that some large parts enterprises to stop production for a few more days, not to affect the overall structure, but the scale of parts enterprises in the entire auto parts supply chain is relatively low, parts enterprises overall present “small, scattered, miscellaneous” characteristics, if the delay can not start, It is likely that some small parts companies will face bankruptcy.

Policy and the whole car factory together

At present, many regions of the country have introduced policies to support the smooth development of small and medium-sized enterprises in response to the epidemic.

Zhu Zhisong, party secretary and executive vice-director of Shanghai Lingang New District Management Committee, said in the investigation, will seriously study the implementation of the municipal government issued 28 comprehensive policies on supporting enterprises, detailed the formation of the new area of the operating rules, support enterprise development, reduce the burden of enterprises, help enterprises to build confidence, through the difficult times.

Some automakers are also helping suppliers through the difficult times. In order to ensure the normal production of its Hyundai and Kia-branded cars, for example, by communicating with central and local governments in China and South Korea, and by providing a batch of protective equipment and thermometers to suppliers’ factories in China, more than half of the suppliers’ factories were licensed by the local government to resume work. In addition, Hyundai announced that it will provide a total of 308 billion won in interest-free loans to 350 small and medium-sized suppliers, and to settle payments to suppliers 15 days ahead of schedule to help suppliers get out of trouble at an early date.

In this regard, the China Automobile Association staff service director Du Daofeng believes that for many small and medium-sized parts enterprises, the biggest problem is the capital problem, the current relevant policies, there are a number of areas mentioned for loans, social security and other financial measures, which is facing cash flow difficulties for enterprises to effectively help. He called on local governments to coordinate low-interest loans for companies experiencing short-lived cash-flow difficulties.

In addition to policy push, some companies have also introduced innovative measures to ensure the normal resumption of work.

Zhang Qiang believes that even if the outbreak is over, the situation is still more serious, car companies still need to expand the customer base to spread their risk.

Cui Dongshu believes that from the experience of SARS outbreak, the spread of the outbreak may play a role in a particular market, and because the basic market of the automotive industry is still, so the recovery of the epidemic will lead to a recovery tide in the automotive industry, suppressed consumer demand may be released again, It may even lead to a brief shortage of supply and demand in some parts companies.