Auto supply chain operators — including vehicle assemblers and component manufacturers — are starting to announce disruptions from Chinese parts missing from the coronavirus outbreak. Fiat Chrysler Automobiles NV has issued warnings about their EU production, the Financial Times reports, while Toyota Motor Corp. and Honda Motor Co. Ltd. have also seen similar issues.
The just-in-time supply chains used by automotive firms are susceptible to event risk due to the low inventories the factories carry, as discussed in Panjiva research of Jan. 28.
In North America Panjiva data retrieved via Xpressfeed shows how auto plants in Mexico may be affected. China accounted for 5.7% of auto parts imports to Mexico in the 2019. While a small amount at first glance, the onward reliance on parts — a missing gasket can prevent engine assembly, for example — means the loss of suppliers from China enough that a disruption could be problematic for auto manufacturers.
This is complicated by the 4.6% year over year increase in imports from China over that same period, while imports from Canada and the U.S. fell by 7.3% year over year. This trend may start to reverse as new rules of origin requirements come into effect with the implementation of the U.S. Mexico Canada Agreement.
The large automakers may already be reducing their reliance on parts from China, potentially on a precautionary basis given the long-standing U.S. tariffs on Chinese imports. Imports associated with Fiat Chrysler and Daimler AG dropped by 37.0% and 64.4% year over year in the 2019 fourth quarter. There has also been an apparent overall weakening of activity — their imports from Canada and the U.S. also declined by 8.3% and 13.9%, respectively.
General Motors Co. meanwhile may be following a different strategy. Its imports from China fell by just 4.5% year over year in fourth quarter while its shipments from Canada and the U.S. fell by 10.5%.
Recreating this analysis in S&P Global Market Intelligence Xpressfeed:
Using the script available from S&P Global Market Intelligence's Quantamental Research Xpressfeed code repository, first select the dimension fields that you want to query by, then add in values. Be sure to aggregate shipments when using the Mexico dataset, the default granularity is items. The query uses a normal union subquery, but filters for wanted HS codes inside the subquery.
Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.