CORONAVIRUS AND THE AFTERMARKET

Note: This article was written in mid February 2020, when the world was a very different place… – Editor

You will have heard all about it: the virus that migrated from species to species in China before spreading around the world. Thousands of column inches have been written, mostly about the human cost and how it has affected the way that people meet and travel, but how will it affect the parts supply chain, and more specifically the aftermarket?

Here’s what we know for sure: factories in China closed as usual for the Chinese New Year celebrations, but didn’t reopen for weeks afterwards. When they eventually did start up again, there were reports of many of them having a fraction of the usual number of staff, due in no small part to many being in isolation, be it voluntarily or at the behest of the state.

Then of course the virus spread, with huge tracts of Asia, including South Korea and Japan, implementing an array of preventative measures to control the outbreak. Closer to home, Italy was accused of under-reporting known cases and parts-producing towns in the country’s ‘motor valley’ have been belatedly shut down.

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SHY RESPONSE

Yet when we asked companies who must surely be exposed to supplier shortages, the answers we got were surprisingly coy. Halfords, for example, wouldn’t answer our list of questions, but did respond with the statement: “We are monitoring the Coronavirus situation carefully. To date, the virus has not had a material impact on stock availability but we are continuing to work closely with our partners across the Far East.”

Similarly, Euro Car Parts answered our request with the simple sentence: “To date, we’ve not experienced any issues with stock availability because of the Coronavirus outbreak. We’re aware of the risk of disruption it still poses, and our supply chain team is working on contingency plans and is in regular dialogue with our suppliers to ensure we’re prepared to mitigate against any potential impact.”

Some other companies simply declined to discuss the issue at all. However, the fact that parts and accessory supply chains have, at the very least, been interrupted is not in dispute.

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TYRE SHORTAGE

Tyres are known to be in short supply at the moment, especially budget products which are typically produced in China or Malaysia. The problem has become such a concern that TyreSafe, a body set up by wholesale distributors and tyre dealers, has issued a release advising motorists to fork out a bit of extra cash for mid-range or premium tyres, and not to buy part-worns, of which the organisation has a low opinion, as it has repeatedly voiced.

Stuart Jackson, Chair of TyreSafe, said: “The vast majority of [budget tyres] are imported into the country from China and across South East Asia where the outbreak of Coronavirus has led to governments closing facilities such as schools and factories to limit the spread. As a consequence, the level of supply the UK has become accustomed to for many products has been reduced.

“Our advice is to seek a good deal on a mid-priced tyre and carry out regular checks to get the best out of that tyre over its full potential lifespan.”

National Tyre Dealer Association Chair Stefan Hay said that most members had a good stock of mid-range tyres, but added: “There can be no doubt that we could see a potential shortage of budget tyres if quarantine and export restrictions are maintained.

“This will affect all manufacturers with an interest in China and other South East Asian countries. For example, I’m aware that production at two of Pirelli’s three factories in China remains suspended in response to the spread of coronavirus. Pirelli has also reported that its entire expat workforce has left the country along with their families. Goodyear Tire and Rubber Co. ‘temporarily’ closed its headquarters and factory in China and the beginning of February and it is uncertain as to how temporary that is.”

Hay added that restrictions in supply can soon bounce back, citing a shortage of tyres a few years ago due to a trade dispute between the EU and China, which was swiftly resolved.

SHUTDOWN

It isn’t just tyres that are affected. The widest range of factory closures is in southern China, which is the heartland for manufacturing electronics, as well as the site of numerous foundries for making hard parts. Murray Silverman, Director of Streetwize Accessories in Manchester, is candid about the impact that factory shutdowns will have on UK business. “ALL businesses will be affected,” he emphasised. “Some might not realise it yet.”

“All suppliers that we have spoken to have advised at least a three week delay as it stands today,” Silverman told us when we spoke in mid February, adding that the date was ‘moveable daily’ and that at the time of speaking, his company could not even contact many of the factories that had not yet returned to work.

A big question mark hanging over the whole situation concerned just how long these delays might become. “Nobody knows how long these delays could go on for,” said Silverman. “We contacted all our customers to advise them that there will be shortages that will escalate during the summer months or earlier and advise them to order whilst we have stocks available. Some customers have reacted but unfortunately there will be those who will realise too late despite warnings.”

One company reacting to the situation is battery charger manufacturer Ctek. “Our suppliers have restarted their production and supply following Chinese New Year,” company spokesperson Stig Mathisen told us. “We are mindful however, that there is a risk that the outbreak could worsen and will continue to monitor the situation closely, introducing contingency plans if there is a requirement to do so.”

Sourcing products from elsewhere is not an option for many, particularly given that northern Italy, a major European production centre of parts, is arguably in a worse state than China at the time of writing. In any case, for the majority of companies it isn’t simply a case of switching production – new suppliers need to be tested, pricing and quantities have to be agreed and then go through any relevant type approval. “Sourcing product elsewhere is not an option, even if we could find the resource and the pricing was acceptable, it takes time to go through our QC and graphics teams,” explained Murray Silverman, adding that in any case a lot of UK and European-made products would also be in short supply, due to the amount of raw material and components that come from the Far East.

A situation that no-one two months ago could have foreseen is the possibility that UK companies might have to let employees work from home if the number of infections in the UK continues to rise. Quite how this could work for a parts distributor or a service and repair garage is anyone’s guess, but if the outbreak spreads further and there are more fatalities, who knows what might happen in the future?

Inevitably, the world will return to normal, and when this happens a new set of challenges may arise. “Even when factories do return, there are likely to be transport issues from the factory to the port and a lack of vessels to cope,” commented Silverman, adding that: “Another eventuality that may occur is that shipping companies and freight forwarders raise their rates to try to pull back the enormous amount of business they have lost.

“There will be further impact in the future,” he concluded.