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HomeNewsCorona Virus Outbreak Worsens Tire and Rubber Companies

Corona Virus Outbreak Worsens Tire and Rubber Companies

2020-02-27
At present, in the communication with enterprises, TireWorld.com has learned that the recent outbreak of new crown pneumonia has greatly affected the production and capital chain of rubber and tire companies.

Some of these companies may go bankrupt because of the outbreak.

Increased production difficulties and pressure on capital chain

After the outbreak, many rubber and tire companies soon felt great pressure.

According to Tire World, many companies, especially SMEs, are facing the following problems.

First, during the postponement of resumption of work and the isolation of foreign employees, companies still had to pay a number of fixed expenses, including rent and interest on loans.


Second, during the postponed resumption period, will the company pay employees? Local standards vary, and some of them require companies to pay their own wages.

Third, patients with new coronary pneumonia and suspected patients are taken measures such as isolation treatment, isolation observation, etc., and employees who cannot work normally should also be paid.

The above-mentioned circumstances have led to the tension of some private rubber and tire companies' capital chains.

At the same time, the epidemic also brought additional labor costs, coupled with delays in resumption of work and delays in order delivery, and the cost of protection for the resumption of production during the epidemic prevention and control period increased significantly.

These difficulties make matters worse for companies that are already in trouble.

In this case, once the capital chain breaks, some companies may face bankruptcy.

Downstream automotive market demand shrinks

While their own production is in crisis, tire and rubber companies have encountered another big problem.

Its downstream automotive market is facing a great demand test.

In Hubei Province, where the epidemic is the worst, automobile production accounts for 8.8% of the country's total, ranking fourth in the country in 2019.


Relevant data show that as of the end of 2018, Hubei Province's automobile manufacturing enterprises above designated size reached 1,482.

Among them, Wuhan, the birthplace of the epidemic, is one of China's four largest passenger car bases, bringing together five major car families: the United States, Japan, France, Britain and China.

China's second largest automobile group, Dongfeng Motor, is located in Wuhan, which owns a number of Chinese-foreign joint venture car companies.

A few days ago, Shenlong Motor said that the official resumption of work would not be earlier than February 14.

The relevant person in charge of Honda (China) stated that the resumption of work for Dongfeng Honda is tentatively scheduled for February 14.

It owns three factories in Wuhan.

In addition, Dongfeng Renault, Dongfeng Passenger Cars, Dongfeng Commercial Vehicles, etc. have all postponed their resumption of work accordingly.

In addition to Hubei Province, Guangdong Province, Jilin Province and Shanghai, which ranked among the top three in terms of automobile production in 2019, have also delayed their resumption of work.

Many multinational car companies and parts companies have arranged to evacuate foreign employees in China and delay or cancel their employees' travel plans to China.

Some auto companies in South Korea, Japan, India and other countries are making decisions to temporarily suspend production and find alternative suppliers to deal with the impact of the Chinese epidemic on the supply chain.

According to analysis, the impact of the pneumonia epidemic is a big hit for the already declining auto market in 2019.

Tire World believes that this crisis will soon be transmitted to upstream companies in the industry chain, further increasing the survival difficulties of rubber and tire companies.

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