ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Automobiles

Japan automakers pump brakes on expansion worldwide

Toyota-Mazda plant in US and Suzuki's India plans delayed amid pandemic

A Toyota assembly plant in France: The coronavirus pandemic is forcing Japanese automakers to reassess their expansion plans.   © Reuters

TOKYO -- Japanese automakers have put plant construction on hold around the world as the coronavirus outbreak spreads, reassessing plans to scale up capacity amid an increasingly clouded market outlook.

Toyota Motor and Mazda Motor recently informed officials in the U.S. state of Alabama that they will postpone the opening of a $1.6 billion joint venture plant there. The state's governor had issued a stay-at-home order earlier in the month to contain the spread of virus infections.

The COVID-19 epidemic has impacted deliveries of important equipment and slowed construction of the Alabama plant. Toyota and Mazda now expect vehicle production to begin in the latter half of 2021, a few months later than scheduled.

Toyota and Mazda formed the capital and operational collaboration in 2017, aiming to assemble 300,000 sport utility vehicles at the plant each year. Production volume would be split equally between the two partners.

A delayed plant opening would leave the two companies in poor position to stage a comeback in North American sales through the high-demand SUVs.

In India, Suzuki Motor is building its third production center in the western state of Gujarat. But the start of operations has been postponed to July from April. Even when the pandemic passes, it is uncertain whether demand will recover. Suzuki has started contemplating further construction delays or freezing the opening of the plant entirely.

Over in China, Nissan Motor intended to start making electric vehicles at a new plant in Wuhan as soon as this year. But the city where the COVID-19 pandemic originated was put under lockdown for months, and Nissan's project is delayed.

Global capacity for auto manufacturing totaled 142.23 million vehicles last year, British research firm LMC Automotive reports, up 50% from a decade earlier as carmakers built plants in developing nations to capitalize on those growth markets.

But demand has lagged behind production capacity during the same 10-year stretch. Auto sales reached just 89.71 million units in 2019, data from IHS Markit shows, up 40% over the decade.

The overall factory utilization rate averaged 63% last year for the second-lowest reading since 2001, ahead of only the 62% rate for 2009 during the immediate aftermath of the global financial crisis. A 70% rate is generally considered necessary for an automaker to make a profit.

Despite those numbers, automakers still increased capacity in anticipation of an expanding global market. But the U.S.-China trade war contributed to a global economic slowdown, quickly followed by the pandemic.

IHS last month forecast a global auto market of 88.31 million units in 2022. The market research firm predicts a large slump this year, then a rebound starting in 2021. But the coronavirus crisis has put industry assumptions in flux. Automakers that fail to rework investment strategies risk being saddled with excess capacity and headcounts.

Additional reporting by Kosuke Terai in Tokyo and Masahisa Yuzawa in New York.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media