"Global Car Factories Reopen"... Operating Factory Rate Rises to 80% Range

According to the Korea Automobile Manufacturers Association Survey, Factory Operating Rate Recovered to 83.5% as of the 19th of This Month

The local factory of a Japanese automobile brand in Thailand

[Asia Economy Reporter Kim Ji-hee] Global automobile factories that had come to a halt due to the novel coronavirus infection (COVID-19) crisis are gradually reopening this month. The factory operation rate, which had dropped to the 20% range last month, has recovered to the 80% range within a month.

According to the "Second Survey on Factory Operation Status by Brand in Major Automobile Producing Countries" released by the Korea Automobile Manufacturers Association (KAMA) on the 25th, the factory operation rate, which was only 28.8% in mid-last month, jumped to 83.5% as of the 19th of this month. This survey was conducted targeting 13 major automobile producing countries including China, the United States, Germany, and India.

Compared to mid-April when factories in East Asia regions such as Korea, China, and Japan were mainly operating, the overall factory operation rate increased as North America, Europe, and India sequentially resumed factory operations. Factories in major European producing countries such as Germany, France, and Spain restarted operations from the end of April, while factories in the United States and India resumed operations at the beginning of this month. From mid-May, some brands including BMW and Mercedes-Benz have also resumed factory operations in Latin American regions such as Mexico and Brazil.

By brand, Tesla and Renault recorded a 100% factory operation rate. Toyota (95%), Mercedes-Benz (92.3%), BMW (90.9%), and Honda (90.5%) also recovered to the 90% range. Hyundai Motor Group, which operates a total of 16 factories in the surveyed countries, has a factory operation rate of 93.8%. Currently, among Hyundai and Kia's global complete vehicle factories, the only factory that has not yet resumed operations is Kia's Mexico factory.

However, due to demand contraction caused by COVID-19, ongoing lockdowns by country, priority infection prevention measures within factories, and delays in parts supply, actual factories are operating on a single shift, and it is expected to take time for production volume per factory to normalize.

As major brands' complete vehicle factories sequentially get back on track, there is also an analysis that competition in the global automobile market will intensify again. Since global demand is expected to worsen in the second quarter compared to the first quarter of this year, it is expected to take some time for the domestic automobile industry, which has a high export ratio, to normalize. Therefore, it is unlikely that Korean brands, which slightly increased their market share in major global markets last quarter, will easily increase their market share in the second quarter as well.

Jung Man-ki, chairman of KAMA, said, "With the global demand cliff continuing, and production volumes of global competing companies expected to increase, our industry may face greater difficulties," adding, "The government’s active measures such as maintaining existing loan limits and rapid liquidity supply, expanding public procurement to promote domestic demand, and expanding employment retention support must continue."