Shanghai lockdowns threaten China auto production

Chinese auto makers warned they may have to put the brakes on production if strict Covid-19 curbs in Shanghai persist, with a top Huawei executive also sounding the alarm Friday about snarled supply chains.

The restrictions have kept Shanghai’s 25 million residents mostly at home for weeks, forcing manufacturers to halt operations and making China’s GDP growth target of around 5.5 percent look increasingly difficult to achieve.

Covid outbreaks across the country and the associated reductions in economic activity have already hit the auto industry hard, with car sales dropping 10.5 percent in March.

“If supply chain companies in Shanghai and its surrounding areas cannot find a way to dynamically resume work and production, all original equipment manufacturers may have to stop production in May,” XPeng chief He Xiaopeng said Thursday on social media.

XPeng has been touted as a Chinese challenger to US electric car giant Tesla, and its chief said that businesses were hoping for more support from the authorities to navigate the Covid closures.

A top executive at Chinese tech giant Huawei—which has started to work with domestic auto manufacturers in the intelligent vehicle sector—echoed the comments on Friday and warned the clock was ticking.

“If Shanghai continues being unable to resume work and production, from May, all tech and industrial players involving the Shanghai supply chain will completely shut down, especially the auto industry!” Richard Yu, head of Huawei’s consumer and auto segment, said on the social media platform WeChat.

Huawei sold its first 3,000 electric vehicles with the company’s HarmonyOS operating system in March.

The group has been working with automakers to provide intelligent auto components, but does not make cars on its own.

The Covid curbs have affected global brands as well, with Volkswagen saying it has been “severely hit by Covid-19 outbreaks in Changchun and Shanghai”, where the German titan’s Chinese joint ventures are located.

The firm is “temporarily unable to meet high customer demand”, said Volkswagen Group China CEO Stephan Wollenstein on Thursday, adding that he hoped the production delays could be made up in the coming months.

China’s zero-Covid policy has been increasingly strained as the country battles its highest number of infections since the start of the pandemic.

Volkswagen said around 20 percent of its dealers were forced to temporarily close in March alone as a result of lockdowns.

Tesla’s multi-billion-dollar “gigafactory” in Shanghai—which the company calls its main export hub—has also been reportedly shut.

Chinese electric vehicle maker Nio said last weekend that it had suspended vehicle production, as business partners in virus-hit areas such as Jilin and Shanghai halted operations.

© 2022 AFP