How the pandemic hinders automobile supply chains

This year was supposed to be a transitional one for the global auto industry. Analysts had expectations that sales in the sector had bottomed out, and that growth in China would support the world market, reversing recent negative sales trends and getting back to a trajectory of growth.

However, the worldwide spread of COVID-19 has become one of the greatest tests to the complex global supply chains created by auto manufacturers over the past 30 years and could lead to another downturn in global sales. On the other hand, the situation has been seen as the perfect storm for the global supply chain to take notice of Vietnam in a much stronger fashion. The auto industry is feeling the effects of the coronavirus outbreak well beyond China’s borders as shortages of supplies from China stall production around the world. While the country is not a significant exporter of fully-assembled vehicles, it has become a major player in the worldwide auto parts and component network. In 2018, China exported almost $35 billion worth of parts and accessories, with the United States importing almost $12 billion.

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Authors

Lam Le
Partner - Head of Tax and Consulting Services