Carmakers sideswiped as Covid-19 controls halt output

China’s carmaking sector has taken another beating from the country’s pandemic curbs, with companies based in Wuhan and Chengdu forced to halt part of production or sales because of lockdowns.

Honda Motor, Volkswagen and Dongfeng Motor’s electric-vehicle brand Voyah have been affected to varying degrees by a broken logistics network and strained supply chains, and there are no clear time frames for resuming operations, according to statements by the companies and media reports.

Voyah said in a statement its 14 service centres in 16 cities including Zhengzhou, the capital of Henan province and Shijiangzhuang, the capital of Hebei province, had been forced to suspend operations since

Sunday because of stringent pandemic curbs.

“We are unable to offer repair and maintenance services for now,” it said. “Delivery of new cars will also be delayed because of virus controls and logistics issues. We deeply apologise for the inconvenience brought to customers.”

The company’s headquarters in Wuhan, and the plants in Zhengzhou and Shijiazhuang, have been hit by outbreaks of the highly-transmissible Omicron variant, with the National Health Commission reporting 38,421 new infections yesterday.

Meanwhile, Honda suspended operations at a plant in Wuhan because a standstill order was issued for the area, according to a Bloomberg report.

Elsewhere, Volkswagen suspended operations at a joint-venture plant in Chengdu, the capital of Sichuan province, while temporarily shutting down two of five production lines at a factory in Changchun, Jilin province, according to a Reuters report.

Neither Honda nor Volkswagen responded to requests for comment yesterday.

“The resurgence in Covid-19 cases around the country may cause big damage to the automotive industry,” said Ivan Li, a fund manager at Loyal Wealth Management in Shanghai. “The government’s tax cuts are fuelling sales of vehicles at present, but a disrupted supply chain could slow growth momentum.”

Beijing halved the car purchase tax rate from 10 per cent to 5 per cent in June to boost the industry, which accounts for one in six urban jobs.

The tax incentive is expected to result in additional sales of 1.8 million vehicles this year, according to a research note published in May by Cheng Siqi, an analyst with China Securities.

The country’s car industry lost 1 million vehicles in production in April amid severe lockdown measures introduced to contain Covid-19 in Shanghai and Changchun.

A strained supply chain caused the industry to lose another 400,000 vehicles in production the following month as carmakers were unable to turn out enough units to cater to market demand.

In the first five months of this year, total vehicle sales in the country slumped by 12.8 per cent year on year to 7.31 million units, according to data from the China Passenger Car Association. Between June and October, an estimated 1.6 million additional cars were sold because of the tax incentives, the association said.

Analysts have been warning in recent months that stringent pandemic controls amid Beijing’s zero-Covid goal could force more carmakers and component suppliers to suspend part of their production.