Carmakers apply brakes and shut plants in zero-Covid China
• VW, Honda and Yamaha suspend production at several sites as coronavirus restrictions lead to parts shortages
Carmakers are opting to shut their plants in China as Covid restrictions make it almost impossible to secure some components, deeming even the closed-loop systems promoted by officials as a way to maintain manufacturing during lockdowns untenable.
Volkswagen on Monday said a shortage of parts was the main reason for a decision to halt production at a joint venture plant it has with China FAW Group in Chengdu and two of five production lines at its Changchun factory. The German carmaker doesn’t have an estimate for when output will resume and has no plans to create closed loops, a spokesperson said.
The unpredictability of China’s restrictions, especially as outbreaks reach record levels, means vehicle manufacturers such as VW face significant supply chain uncertainties, people familiar with the situation said, asking not to be identified because they are not authorised to speak publicly.
Without a stable and steady supply of parts, it’s difficult to make any production plans, let alone move to closed-loop systems that would keep plants running, the people said.
Chinese electric car company Xpeng faces a similar challenge, according to a person familiar with its situation.
Li Auto has delayed the delivery of two models because of component shortages, the Beijing-based carmaker said in a statement. Representatives for VW and Xpeng didn’t immediately respond to requests for comment.
First used during the Beijing Winter Olympics as a way of keeping athletes and support staff separate from the wider population, closed loops were meant to be the panacea that would keep China’s economy chugging even as Covid restrictions limited movement.
While they were effective in helping companies such as Tesla restart output during the Shanghai lockdown earlier in the year, the systems have become less tenable the longer the pandemic endures, with workers separated from their families and the outside world for months.
Tesla achieved its closed loop earlier this year only because local officials helped co-ordinate with more than 100 suppliers, according to a person familiar with the situation.
Provincial governments can vary in their power and heft, and Shanghai has been a consistent Tesla backer.
Conditions under a closed loop at the Chinese factory complex of Apple’s main global production partner recently seeded unrest, which led to a mass exodus of employees and a violent clash with security guards. The situation at the massive factory — known as iPhone City — has laid bare how unviable closed loops are long term, further testing China’s already frayed zero-Covid strategy.
Mounting dissatisfaction among Foxconn Technology’s ranks now threatens to further disrupt production at the Zhengzhou plant, which cranks out most Apple iPhones for shipment around the world.
More broadly, public anger over China’s zero-tolerance approach to the coronavirus is rising, with extraordinary street protests at the weekend. That may make companies even less willing to keep employees effectively locked up in factories for extended periods.
Honda Motor also suspended its operations in Wuhan, the original virus epicentre, because of limitations on movement introduced in the area. How long the plant will remain closed hasn’t been decided, a spokesperson said Tuesday.
Honda also extended the suspension of operations at another plant producing engines for lawnmowers in Chongqing, southwest China.
Motorcycle maker Yamaha is partially halting production at its plant in Chongqing, where 8,721 new Covid cases were reported on November 28, making it one of China’s biggest outbreaks. Japanese carmakers, including Nissan, Mazda and Mitsubishi, said their Chinese operations have not been affected yet.
Toyota, the world’s top carmaker, is adjusting production at some of its Chinese factories due to multiple factors, said spokesperson Shino Yamada, declining to elaborate.
Contemporary Amperex Technology, the world’s biggest maker of batteries for electric cars, said its plants in China are operating normally so far.
Closed-loop systems typically require workers to travel from on-site accommodation to a factory and back, strictly avoiding contact with outsiders.
VW used such a system earlier this year with mixed success. After locking workers in and then finding the supply of parts was disrupted, VW resorted to scheduled group activities such as voluntary rubbish collecting and movie nights to keep people occupied.