Now made in Mexico: Japan auto suppliers shift China production after coronavirus

TOKYO (Reuters) – In the Chinese coastal province of Jiangsu, where supply chains have been shattered by the coronavirus outbreak, one auto supplier has already shifted production of parts for Mazda Motor Corp 13,000 kilometres away to central Mexico’s Guanajuato State.

The bid to keep production lines moving comes at a high cost for Japan’s auto industry, already squeezed by an expected downturn in consumer demand in markets such as the United States, China and Japan as the coronavirus crisis deepens.

To deal with a Chinese production shortage of a component used in the exterior trim of the Mazda3 and CX-30 models, the auto supplier cranked up output of the part at its Mexico plant by 50%, airlifting the products to Mazda’s assembly line in Japan, a person at the supplier with direct knowledge of the matter told Reuters.

In total, the move has cost Mazda more than $5 million, the person said, citing extra shifts and air freight charges.

“Substitute production costs an arm and a leg,” said the person, who spoke on condition of anonymity and asked Reuters not to identify the supplier or the part.

“But Mazda doesn’t want to stop production and have asked us to keep our supply coming. They are taking on the expense.”

A Mazda spokeswoman said the company was “assessing various countermeasures for swift recovery while minimising the impact on production at the same time”.

Although Mexico provided a solution for the Mazda supplier, the country is itself bracing for a supply crunch, with local officials warning that disruptions to parts shipments from China could deal a blow to its own auto manufacturing industry.

Many Japanese suppliers also manufacture in the United States, Europe and Asia.

As one of Japan’s smaller automakers, Mazda trails rivals Toyota Motor Corp and Nissan Motor Co in sales and production capacity. To keep costs down, it has for years focused on sharing as many parts as possible across its line-up.

Relatively low volumes and the standardised design and production model also give Mazda and its suppliers more flexibility when considering options for shifting production, one Mazda insider said.

Larger automakers, which require a higher volumes of parts and typically use a wider variety of components across their models, may, however, find themselves with fewer options.

(For an interactive link to major Japanese automakers’ sales and production in China, click on https://tmsnrt.rs/2TEpfLe

Source: REUTERS

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