Shanghai and Jilin lockdowns: China’s carmakers lost 1 million vehicles in production last month amid strict Covid-19 containment measures

Impossible to restore the entire supply chain before June, analyst says
Nationwide sales also plummeted, declining by 47.1 per cent, in April: CAAM

Shanghai

Daniel Renin Shanghai

Published: 8:30am, 13 May 2022

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China’s automobiles industry lost 1 million vehicles in production last month amid severe lockdown measures introduced to contain outbreaks of the highly transmissible Omicron variant of Covid-19.

Total output by all carmakers across the country plunged by 46.2 per cent to 1.2 million units, as major companies, ranging from Tesla, General Motors and SAIC Motor in Shanghai to FAW Group and its joint ventures with the likes of Volkswagen (VW) in the northeastern Jilin province, idled assemblies amid a breakdown in supply chains.

Data by the China Association of Automobile Manufacturers (CAAM) shows that nationwide sales also plummeted, declining by 47.1 per cent to 1.18 million units.

“Production volume will continue to drop in the coming one or two months, because it is impossible to restore the entire supply chain before June,” said David Zhang, a researcher at the North China University of Technology. “In the Yangtze River Delta, thousands of automotive supply-chain firms took a pounding from the coronavirus control measures.”

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The automobiles industry is one of China’s biggest employers, providing jobs for one in every six among its workforce of 800 million people, according to analysts’ estimates.

Output in April was at its lowest in 10 years, CAAM said. And while it does not publish data for individual car firms, it said companies in Shanghai and Jilin were the hardest hit owing to strict lockdown measures.

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Last year, Shanghai churned out 2.83 million vehicles, or 10.7 per cent of China’s total output. In Jilin, 2.42 million units were assembled last year, representing 9.2 per cent of the national total.

In Shanghai, Tesla’s Gigafactory 3 is estimated to have lost 50,000 vehicles in production due to a suspension between March 28 and April 18. On Monday, the US carmaker, which is viewed as the bellwether of China’s electric vehicle (EV) sector, suspended production at its factory because of a shortage of vital components, just three weeks after it resume production under the so-called closed loop system, where workers sleep on-site to avoid contact with outsiders.

Its factory, which is also known as Giga Shanghai, could only run a single shift initially owing to a shortage of components, which limited output to about 1,000 vehicles a day – only half the plant’s normal daily output of more than 2,000 cars.

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FAW, China’s oldest carmaker and once a symbol of the Communist Party’s manufacturing might, as well as its ventures with VW and Toyota, were unable to assemble vehicles between March 13 and April 12. A week of suspensions translates into a loss of about 60,000 cars at FAW and its partners.

The lockdown in Jinlin has been lifted, and FAW and its joint ventures began ramping up production at their factories last week, but Shanghai has yet to publish a time frame for easing its draconian pandemic curbs.

The impact of lockdowns on carmakers based in other parts of the country was also severe, as many rely on supply-chain vendors in Jilin and the Yangtze River Delta, which comprises the Shanghai, Jiangsu, Zhejiang and Anhui provinces.

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He Xiaopeng, the co-founder and CEO of Xpeng, the Chinese smart EV start-up, wrote in a blog on April 14 that the world’s largest car industry could halt altogether by May if supply-chain bottlenecks were not resolved soon.