- Many factories from other carmakers have slowed output but it may not be enough.
- Production at Honda will be suspended for six days.
- All 27,600 Honda workers affected by the decision will continue to be paid.
This is another case of not if the factories were going to be idled, rather than when. As the novel COVID-19 virus continues to spread, its effects are being felt on many levels. Consumers are not buying new vehicles as quickly as they did only a few weeks ago and there’s always a risk of contagion in areas where numerous people work. In order to align production with market demand and to clean the factories, Honda will suspend production at all of its North American plants. This will reduce output by 40,000 units during this time.
Honda‘s move reflects decisions made by Ford and FCA where some factories have seen their activities suspended because of the current situation. Dealerships have sufficient inventory to normally supply the demand for a few months however the sharp drop in shoppers and the ensuing massive drops in deliveries will turn production plans on their head. Depending on the industry expert, year-over-year declines in sales for March could stand at between 15% and 20% while April could see a far more considerable drop of up to 50%.
In order to slow plummeting sales, manufacturers are turning up the deals and incentives. GM is offering 0% interest over 7 years, Ford and GM will allow delayed payments and Hyundai will cover up to 6 months of payments should the buyer lose their job after a purchase.
Dealerships have noted 25% to 50% drops in foot traffic in showrooms, making their job that much more difficult. Many dealerships are putting more emphasis on their online presence and the fact that a new car can be purchased without heading out to an establishment. At the moment however, the overwhelming majority of consumers prefer to complete the transaction in person.
These efforts may only temporarily help however the likely closure of more factories in North America will pose a bigger problem for manufacturers. Honda will shut its factories down on March 23rd and start them up again on March 30th. More carmakers will follow suit before long.
This story is far from over.