Coronavirus outbreak will disrupt production of popular SUVs, light trucks

There is no denying that the coronavirus outbreak will slow down the auto industry's fastest-growing segment: light trucks, SUVs and crossovers.

The effects of the novel coronavirus that started in China — and has now infected more than 100,000 worldwide, including one in Minnesota — could end up slashing sales in China by 1.6 million vehicles, speakers said at the Twin Cities Auto Show's first National Truck Summit on Friday.

"We expect to see a production decline, and you will see corresponding sales declines," IHS Markit's automotive global technology lead Mark Boyadjis told 150 dealers, bankers and vehicle experts gathered at the Minneapolis Convention Center a day before the start of the auto show's 10-day run.

Scott Lambert, president of the Greater Metropolitan Automobile Dealers Association, said there is "no ignoring the hiccup."

Dealers already had a slower January and February, he said.

"But there should be inventory that they [dealers] can fall back on. Hopefully this is a short-term problem," Lambert said.

The swiftness and depth of the disruption caused by the coronavirus outbreak caught many automakers and dealers by surprise, they said.

Ford and Toyota representatives said Friday that North American sales and production were not yet directly affected by coronavirus and they are working hard to keep any future disruptions at bay, especially as the virus spreads globally.

"It's still early, and we are still looking at the impacts. Our purchasing groups are watching and measuring closely," said Jay Sackett, Toyota North America executive program manager for trucks.

Boyadjis told the group that the effects on the Chinese auto market will spread to other countries. Last week, Nissan and Honda delayed restarting their factories in China. IHS said more vehicle factories could close there, reducing the manufacturing output in China by 1.6 million vehicles this year.

"The next wave of impact is [from] all the production that happens elsewhere in the world because of components made in China. Think of seats and electrical components and even something as simple as a sparkplug," he said.

Those next waves will hit Europe and then the United States, Boyadjis said.

"There will be effects felt throughout the year [in] supply chains and vehicle production," he said.

Matt Weiss, president of the global auto supply firm JATO Dynamics, said that for suppliers to the industries, the virus "impact is sizable."

"But it's not something we can't get through," he said. "The actual disruption is about seeing how quickly we can find a way forward."

The inaugural National Truck Summit was an homage to a product success story as the SUV and light-truck segment supplanted sedans as the top seller in the U.S. There were talks about trends such as luxurious interiors for trucks, driver assist technologies and the move toward electric trucks.

Minnesota is the leader in the percentage of new vehicles sold being SUVs, crossovers and trucks at 82%. Nationwide, light-truck sales catapulted to a record 12.2 million units last year, or 72% of all vehicles. That change led Ford to begin phasing out sedans, bringing back its Ford Ranger and Bronco trucks and committing to making fully electric trucks.

"America used to really love the sedan," said Lambert of the Twin Cities auto dealers association. "But today the U.S. vehicle consumer's fondness is for light trucks, including pickups, SUVs and crossovers."

The fact that light-truck popularity has come at the same time as desire for electric and battery-run options means Ford is all in on both, said Tim Stoehr, Ford's North American truck regional product line manager.

The good news about trucks, however, may eventually be overcome by disruptions from the coronavirus outbreak.

"People are not going out to buy $40,000 vehicles when they are concerned about their livelihood" halting because of a quickly spreading virus, said Boyadjis of IHS Markit.

The coronavirus has already played havoc with the global hotel, airline and cruise-line industries and disrupted U.S. manufacturers awaiting components and other supplies mainly from China, but also Korea, Japan and Italy.

Boyadjis noted that the virus effects have only compounded problems in China that started in 2019 with an economic slowdown and trade battles with the United States.

Dee DePass • 612-673-7725