Automotive sector especially vulnerable to coronavirus impacts

New York — Automotive suppliers and manufactures are among the industries most likely to feel the economic impact from the coronavirus outbreak, according to a new report from Moody's Investor Services.

Health care-related operations, as expected, will benefit as the need for products and services spike.

The study from credit-rating firm Moody's Investors Service lists both suppliers and auto makers along with apparel companies, consumer durable firms and the gaming industry as having "high exposure" to impacts from the virus.

Other key markets with the most exposure include lodging and tourism, airlines, non-food retailers and global shipping, Moody's said.

Chemicals, manufacturing, oil and gas, service companies all fall under "moderate exposure," while construction and materials, defense, equipment and transportation and packaging have "low exposure" at this point, Moody's said.

"Global auto makers are also under great pressure because of their reliance on international supply chains," Moody's said.

"Companies' ability to withstand the effects of the COVID-19 virus will depend on its duration, and we caution that as events unfold very rapidly on a daily basis, our assessment of exposure will change over time," Richard Morawetz, a Moody's vice president and co-author of a report on the issue, said.

The credit-rating agency said the report is based on "normalisation of economic activity" during the second half of 2020.

"Moody's downside scenario factors in a jump in cases and public fear that the virus will not be contained in the first half of 2020, leading to extensive and prolonged travel restrictions and quarantines, along with a prolonged slump in commodity prices."

Gross domestic product growth in advanced economies around the world will fall to an expected 1% this year, down from 1.7% last year, Moody's predicts.

"The ability of some companies to withstand the effects of the virus will depend on its duration. We caution that as events unfold very rapidly on a daily basis, there is a higher than usual degree of uncertainty around our forecasts and our assessment will evolve over time with new developments," the credit rating firm.

A slowdown in automotive sales will impact the supply chain including OEM parts containing rubber as well as tires needed for new vehicles. The new vehicle business is softening amid the crisis and dozens of assembly plants in Europe already have closed due to a downturn in sales.

Decisions to close automotive assembly lines will quickly flow back upstream in the supply chain.

Sectors including health care services and waste management will benefit from the demand for essential services, Moody's said.