VW is automaker most exposed to virus impact, S&P says

Volkswagen Group is the automaker most exposed to the coronavirus outbreak in China, according to Standard & Poors.

VW Group produces and sells almost 40 percent of its cars in China, and while its main plants are outside of the epicenter in Hubei province, they are likely to be closed for extended periods by government restrictions aimed at combating the disease, S&P said in the report issued Wednesday.

At risk are about 3 billion euros ($3.3 billion) in dividends that Volkswagen’s Chinese joint ventures pay to their German parent, according to the report from S&P analysts led by Vittoria Ferraris.

The virus forced S&P to rip up its forecast for a recovery of the Chinese market after two down years. Sales in the world’s biggest automotive market are no longer expected to meet the analysts’ base case for 1 percent to 2 percent growth in 2020.

Nissan was singled out for having relatively high risk “considering its high exposure and recently weak performance,” S&P said.

Honda has a production base in the outbreak city of Wuhan and relies on China for 30 percent of sales and output, the analysts said.

Supply chains are also at risk, S&P said, with Robert Bosch, the largest global automotive supplier, expected to be “hard hit.”

Most Bosch sites “are preparing to resume production in the next days,” Bosch said earlier this week. “We constantly evaluate the situation.”

French supplier Valeo said it is not experiencing any major disruption to its supply chain in China for now.

Last month, Valeo said it would be extending its plant closures in China's Wuhan until at least Feb. 13. Valeo operates three sites in Wuhan, which employ 1,900 people.

Premium Italian brakes producer Brembo said it sees no major impact on its operations. "The immediate impact is very limited because what we make in the Chinese plants stays in China," Chairman Alberto Bombassei said on the sidelines of an event in Milan.

Brembo has a factory in Nanjing. It expects to restart production on Feb. 10.

The virus outbreak has started to hit auto production outside of China.

Hyundai is suspending production in South Korea because of a shortage of wire harness parts produced by Chinese suppliers.

Tesla said last week a 1 week to 1.5 week delay to ramp production of its Model 3 sedans built in Shanghai due to a factory shutdown would may slightly impact profitability in the March quarter. The company is also evaluating whether the supply chain for cars built in its Fremont, California plant will be affected.

Automakers have prolonged holiday shutdowns at their China operations due to the virus outbreak.

• BMW's China venture with Brilliance plans to restart car production on Feb. 17, according to a post on its social media.
• Ford Motor plans to resume production on Feb. 10 at its factories in Chongqing and Hangzhou with joint venture partner Chongqing Changan Auto. Ford excluded any potential impact from its already weaker-than-expected forecast for the year, saying it was too early to make an estimate.
• Honda plans to extend the closure period for its three car plants in Wuhan, which it operates with Dongfeng Group, until Feb. 13.
• Nissan said it is considering restarting production in China in its venture with Dongfeng sometime after Feb. 10. Production in Hubei will start sometime after Feb. 14, it said.
• PSA Group said its three plants in Wuhan, the epicentre of the outbreak, will remain closed until Feb. 14.
• Toyota shut factories in China through Feb. 9. The automaker, which runs plants in regions such as the northern city of Tianjin and the southern province of Guangdong, said it was assessing its parts supply situation.

Reuters contributed to this report