Shanghai shutdowns threaten Chinese auto production

BEIJING

Chinese automakers have warned they may have to curb production if strict COVID-19 restrictions in Shanghai persist, with a senior Huawei executive also sounding the alarm on April 15 about blocked supply chains.

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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% lower in more difficult to reach.

COVID outbreaks across the country and associated reductions in economic activity have already hit the auto industry hard, with car sales falling 10.5% in March.

“If supply chain companies in Shanghai and surrounding areas cannot find a way to dynamically resume work and production, all original equipment manufacturers may have to stop production in May,” he said. said XPeng chief He Xiaopeng on April 14 on social media.

XPeng was touted as a Chinese challenger to U.S. electric car giant Tesla, and its chief said the companies were hoping for more support from authorities to navigate the COVID shutdowns.

A senior executive at Chinese tech giant Huawei – which has started working with domestic automakers in the smart vehicle sector – echoed the April 15 comments and warned that time was running out.

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

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

The group works with car manufacturers to provide smart car components, but does not manufacture cars itself.
COVID-related restrictions have also affected global brands, with Volkswagen saying it has been “severely affected by the COVID-19 outbreaks in Changchun and Shanghai”, where the German titan’s Chinese joint ventures are located.

The company is “temporarily unable to meet strong customer demand,” Volkswagen Group China CEO Stephan Wollenstein said on April 14, adding that he hoped production delays could be cleared in the coming months.

Volkswagen said about 20% of its dealerships were forced to close temporarily in March alone due to the shutdowns.

Tesla’s multibillion-dollar “gigafactory” in Shanghai – which the company calls its main export center – was also reportedly closed.
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.

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Spring planting by Chinese farmers who feed 1.4 billion people could be disrupted, Nomura economists warned on April 14. This could boost demand for imported wheat and other foodstuffs, pushing up already high world prices.

Restrictions on regions that produce smartphones, consumer electronics and other goods around the world prompt forecasters to cut expectations for this year’s economic growth to just 5%, down sharply from the expansion up 8.1% from last year.

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The ruling party’s target is 5.5%. Growth fell to 4% year on year in the final quarter of 2021 after tighter official debt controls triggered a slump in home sales and construction, industries that support millions of jobs.

SHANGHAI, Automotive,

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