[ET Net News Agency, 6 February 2020] Moody's Investors Service said in a new report
that the coronavirus outbreak will impact both Chinese auto supply and demand, but that
the short-term impact will be mitigated by long-term demand growth in China, and by the
healthy fundamentals of the rated automakers.
"In the near term we expect the outbreak will hit sales as potential customers avoid
crowded places, including dealerships, while production will be hampered by
government-mandated days off, the reduced flow of migrant workers across China and
disruption to the auto parts supply chains," said Gerwin Ho, a Moody's Vice President and
Senior Credit
Officer.
"However, we expect many customers are merely postponing their purchase and that
long-term demand growth remains largely unaffected, supported by China's economic growth
and low auto penetration," added Ho.
Moody's expects rated automakers will be able to absorb the impact on sales and
production from the coronavirus, supported by their solid business profiles in terms of
scale and competitive market positions, as well as their good financial buffers.
Among the rated Chinese automakers, Dongfeng Motor Group Company Limited (00489)(A2
stable) has a relatively high capacity exposure to Hubei, with about 50% of its production
capacity based in the province at the end of 2019.
However, even assuming a significant two-month production disruption, in particular in
Hubei province, Moody's expects Dongfeng's resultant leverage will remain consistent with
its standalone credit profile. (KL)