Carmakers to suffer ripple effects of Sichuan earthquake

Shanghai, May 19 (Gasgoo.com) After the devastating earthquake that hit Sichuan province in western China on May 12, Chinese carmakers, especially those in the quake-stricken areas, will suffer the negative ripple effects of this deadly natural disaster on their production, supply, raw material costs, and product prices.

Carmakers in Sichuan and Chongqing evacuated their staffs to safety when the earthquake occurred last Monday. Ford, Honda, and Nissan said there was no immediate damage to their factories in Sichuan, Chongqing and other affected areas. Changan Ford Mazda, Changan Suzuki, Chonqing Lifan, and other companies have resumed their production within a week after checking and reparing the small damages. FAW-Toyota has resumed limited production at its plant in Chengdu. The company will cancel one of two daily shifts between May 19 and May 24 at its plant in the capital of Sichuan province.

Although the vehicles made in the earthquake-hit areas are now available nationwide and the prices are stable for the moment, some dealers expressed worries that those cars manufactured Sichuan and Chongqing will be in short supply after the products in the storehouses are sold out. The logistics and transportation will pose the biggest challenge for the Sichuan-based carmakers as well as their dealers and auto-parts suppliers in other parts of the country, as most highways and railroads to and from the disaster areas are used for the transportation of relief supplies.

The disaster may disrupt the supply of industry and agricultural products and increase inflationary pressure. In addition, the damaged houses, roads, bridges and many other infrastructural facilities have to be rebuilt or repaired, and this will raise the prices of raw materials such as steel and iron. If the prices of steel and other materials continue to rise, the carmakers will have an uphill battle to fight this year and beyond to achieve their cost control and energy efficiency.

It is still premature to say whether the prices of cars will rise as well as a result of the ripple effect caused by the earthquake. But if the disrupted supply and logistics transportation can not return to normal this year, the prices of vehicles made in Sichuan and Chongqing will be unlikely to remain as stable as now.