In a social media post published Thursday, He Xiaopeng, CEO of Chinese electric vehicle maker XPeng, warned that production in all domestic auto assembly plants could pause unless key suppliers in Shanghai and surrounding areas are to figure out a way to re-open by May.
Richard Yu Chengdong, head of Huawei’s consumer and auto division, expressed similar concerns in a WeChat post. “If Shanghai is unable to resume production by May, all of the tech and industrial players who have supply chains in the area will come to a complete halt, especially the automotive industry,” Yu wrote. “Economic losses across these industries could be huge.”
China is battling its biggest COVID-19 outbreak since early 2020, driven by the highly transmissible BA.2 version of the Omicron variant. Shanghai and northeastern Jilin province are the two regions logging the most cases. Both serve as major hubs for auto production, making up over one-fifth of the national output in 2020, according to a market consultancy.
Several major automakers’ joint ventures, including FAW Volkswagen, FAW Hongqi, and SAIC General Motors, have seen slumps of over 30 percent in their production volume in March, according to China Passenger Car Association.
Some factories in the two regions made plans for staff to live on-site in order to work through the lockdown. But with shipments cut off, many have had to shutter plants after running out of components as well as solutions.
“The sales momentum in the auto sector from 2021 will mostly be lost due to the pandemic,” said Tu Le, Managing Director of consultancy Sino Auto Insights. In 2021, production and sales of autos in China rose 3.4 percent and 3.8 percent yearly, breaking a three-year down streak, according to the China Association of Automobile Manufacturers. Le told Sixth Tone that full resumption of auto production to 2021 level will take at least three months once the virus has been contained.
On March 28, Tesla announced a closure of its Shanghai Gigafactory as the local government imposed a two-phased lockdown across the metropolis. Reuters reported today that the plant is set to reopen 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 suspended production earlier in regions including Shanghai, Jiangsu province, and Jilin. The plant reopened on Thursday due to a slight recovery in the supply chain.
“The good news is, local governments are stepping up and coordinating efforts to address the issues,” XPeng’s He wrote in his post, calling for more support and action from government.
“The government needs to work with the industry and together come up with ways to allow production to restart quickly,” Tu said. “And once it’s restarted, come up with ways to quickly contain any new outbreaks so production won’t be disturbed. It’s almost worse to start and then stop and then start again.”
Editor: David Cohen.
(Header image: A girl plays with an Xpeng display car in Yantai, Shandong province, Nov. 26, 2021. Tang Ke/VCG)