Lockdowns hold back east China’s auto industry

In a social network Publish Released on Thursday, He Xiaopeng, CEO of Chinese electric vehicle maker XPeng, warned that production at all domestic auto assembly plants could come to a halt unless major suppliers in and around Shanghai find a way to reopen. by May.

Richard Yu Chengdong, head of Huawei’s consumer and automotive division, expressed similar concerns in a WeChat Post. “If Shanghai is unable to resume production by May, all tech and industry players that have supply chains in the region will come to a complete halt, especially the auto industry,” Yu wrote. “The economic losses in these industries could be enormous.”

China is battling its biggest outbreak of COVID-19 since the start of 2020, driven by the highly transmissible BA.2 version of the Omicron variant. Shanghai and the northeastern province of Jilin are the two regions with the most cases. Both serve as major hubs for auto production, accounting for more than a fifth of domestic production in 2020, according to a market board.

Several joint ventures of major automakers, including FAW Volkswagen, FAW Hongqi and SAIC General Motors, saw their production volume drop by more than 30% in March, according to the China Passenger Car Association.

Some factories in both regions have planned for staff to live on site in order to work during the lockdown. But with shipments halted, many have had to close factories after running out of components as well as solutions.

“Sales momentum in the automotive sector from 2021 will be lost mainly due to the pandemic,” said Tu Le, managing director of consultancy Sino Auto Insights. In 2021, China’s auto production and sales rose 3.4% and 3.8% annually, ending a three-year streak of declines, according to the China Association of Automobile Manufacturers. Le told Sixth Tone that fully resuming auto production to 2021 levels will take at least three months once the virus is contained.

On March 28, Tesla announced the closure of its Shanghai Gigafactory as the local government imposed a two-phase lockdown across the metropolis. Reuters reported today that the factory is expected to reopen on April 18, citing unnamed sources.

As for Nio, the new-energy vehicle maker temporarily suspended production lines at its assembly plant in the eastern city of Hefei on April 10, after parts suppliers halted production earlier in parts. such as Shanghai, Jiangsu Province and Jilin. The factory reopened on Thursday due to a slight recovery in the supply chain.

“The good news is that local governments are stepping up and coordinating their efforts to resolve the issues,” XPeng’s He wrote in his post, calling for more government support and action.

“The government needs to work with industry and find ways together to allow production to restart quickly,” Tu said. “And once restarted, find ways to quickly contain any new outbreaks so that production is not disrupted. It’s almost worse to start, then stop and start again.

Publisher: David Cohen.

(Header image: A girl plays with an Xpeng show car in Yantai, Shandong province, November 26, 2021. Tang Ke/VCG)