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China Virus Threatens Auto Industry

By Friday, 31 January 2020 11:27 AM Current | Bio | Archive

Auto sales in China have already fallen for 2 years in a row now, and even before the coronavirus outbreak, we expected another decline in 2020.

How are auto manufacturers weathering this storm and do they have any contingency plans for shifting manufacturing elsewhere?

Could the coronavirus stall auto sales? The impact is real and it’s going to impact the auto manufactures but more so the impact auto suppliers is huge.

The virus will negatively impact the bottom line to travel and leisure industries.

In other automotive news, Japan, authorities issued arrest warrants for a former US special forces soldier, and two other men suspected of smuggling Carlos Ghosn out of Japan. Japan also issued an arrest warrant for Carlos, but since he's in Lebanon, and Japan and Lebanon do not have an extradition treaty, it is unlikely that Lebanon will hand him over. However, Japan and the US do have an extradition treaty.

Tesla (TSLA) is hitting a new high, up more than 10% this week on its second straight quarter of earnings beat, and essentially doubling its market cap in a few months. Why are we celebrating this accomplishment? It's the second beat Tesla has ever had since they staged its IPO, which means, they failed for 39 consecutive quarters. So why are we rewarding them so much for essentially doing less bad and not failing this quarter?

The results were very poor, especially when we combine them with the previous quarter, Q3, in order to get the full picture of the second half of 2019. Revenue fell from $14.1 billion in 2H 2018 to $13.7 billion in 2H 2019, down 3%. Net income fell from $450 million in 2H 2018 to $248 million in 2H 2019, down 45%. Earnings per share fell from $2.63 in 2H 2018 to $1.38 in 2H 2019, down 48%. Speculators are both strings stock and this could be dangerous to investors.

A lot of this ramp up was based on Tesla opening up its Shanghai production factory. But they haven't officially commenced production there yet. Now with the virus outbreak and manufacturing shutting down in multiple regions, so are we getting ahead of ourselves? This could be a huge impact to the stock and to sales of Tesla in China. It looks like we’re looking at months of no production due to the virus and this is definitely going to impact the first quarter.

With sales in China already being less than expected this is certainly not going to help the Chinese economy.

Lauren Fix, The Car Coach® is a nationally recognized automotive expert, media guest, journalist, author, keynote speaker and television host. Post your comments on Twitter: @LaurenFix or on her Facebook Page.

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Auto sales in China have already fallen for 2 years in a row now, and even before the coronavirus outbreak, we expected another decline in 2020.
china, virus, auto, industry, cars
Friday, 31 January 2020 11:27 AM
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