Top automakers Nio, Tesla, and Volkswagen, are temporarily closing their plants in China as a new omicron-led coronavirus outbreak spreads through the country. Following China’s covid zero policy, cities rush to implement lockdowns, creating broken links in the local supply chain.
Why it matters: The spread of the highly transmissible omicron variant is the latest hit to automakers in China after struggling for months to cope with raw material and parts shortages resulting from continued high demand and now worsened by the Russia-Ukraine war.
Details: Nio, Tesla, and Volkswagen have closed their assembly plants in China – without providing a targeted return-to-work date.
- Nio said on April 10 that it had temporarily stopped production lines at its plant in the eastern city of Hefei, after parts suppliers suspended operations earlier in “multiple” regions including Shanghai, the eastern Jiangsu province, and the northeastern Jilin province. Vehicle delivery is also delayed, according to an announcement (in Chinese).
- Tesla on March 28 closed its Shanghai Gigafactory for four days as the local government enacted citywide lockdown measures. The shutdown has since been extended indefinitely due to a severe lack of staff and components, news website Electrek reported on April 6, estimating a potential production loss of at least 24,000 vehicles. The US EV giant delivered 65,814 vehicles last month, an 85% increase from a year earlier, according to CPCA.
- Volkswagen announced on April 1 that its Shanghai plant, operated as a joint venture with China’s SAIC Motor, was due to be closed for five days, a few days after a 48-hour suspension during mid-March. The production suspension is still ongoing, however, according to a Monday report by Chinese media Caixin. Previously, the German automaker’s joint venture plants with FAW Group in Changchun (the capital city of Jilin province) also shut down on March 13. FAW on Monday announced that it had begun reopening facilities, local media reported.
Context: China’s overall car production volume could slump by 20% with the current omicron outbreak, Cui Dongshu, Secretary General of the China Passenger Car Association (CPCA), said on Monday during an online conference, without giving a timeframe.
- In March, China’s passenger vehicle output fell slightly by 0.3% to 1.82 million units from a year earlier, with the luxury segment the hardest hit as production volume declined 31% on an annual basis, according to the latest figures published by the CPCA.
- Last month, the passenger electric vehicle (EV) sector saw strong growth with retail sales up 137.6% from a year ago to 445,000 vehicles last month. The CPCA did not provide an estimate on auto sales for 2022 since the situation remains fluid, but maintained its estimate of passenger EV sales at 5.5 million units for 2022, Cui said.