COVID-19 Shutters Production in China
Tesla Inc. has had to shut down its plant in Shanghai for a total of 12 production days in recent weeks because of China’s COVID-19 lockdowns.
A shortage of truck drivers has semiconductor chips piling up at manufacturers. Bankers are even camping out in their offices as COVID cases build.
Shanghai has become the epicenter of China’s worst outbreak since the pandemic began and the city’s lockdown has been extended indefinitely. China maintains a rigid Covid-Zero containment policy, though President Xi Jinping seeks to limit the economic consequences of these lockdowns.
Containment measures and lockdowns threaten to slow China’s economic growth in 2022, falling below the government’s 5.5% target, according to Bloomberg Economics. The country also risks further havoc on stressed supply chains.
Anonymous sources report Tesla plans to keep its Shanghai factory closed through April 7.
The shutdowns are wreaking havoc on production. The Shanghai Gigafactory produced half of the company’s vehicles last year, and builds cars not for China, Europe and elsewhere in Asia.
Some companies, including chip giants Taiwan Semiconductor Manufacturing Co. and SMIC, and iPhone assembler Pegatron Corp. have kept plants running by implementing a closed loop system where workers live on-site and get tested regularly. These companies now report struggles in getting trucks to move their chips to clients.
Singapore’s Spindex Industries Ltd., which supplies precision components to the automobile industry, extended closures at its Shanghai plant until April 10 or whenever local authorities allow work to resume. The company expects expected the measures to negatively impact its financial performance.
BWM has halted production in the northern Chinese city of Shenyang for two weeks after a lockdown last month in an attempt to limit the spread of Covid-19.
The German automaker has suspended production at both factories in the Liaoning province since March 24, after the municipal government imposed stricter controls over residents starting March 22.
The factories produce the BMW 3 and 5 Series and have a total of annual production capacity of about 700,000 units.