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International News From the Field: China

China’s zero tolerance toward COVID continues to take its toll on the local economy, particularly in the automotive sector. This week we take a closer look at the local automotive supply chain data that has global economic implications.
May 18, 2022

China’s zero tolerance toward COVID continues to take its toll on the local economy, particularly in the automotive sector, where China leads the world in annual units produced. This week we take a closer look at the local automotive supply chain data that has global economic implications.

  • Jilin Province in Northern China experienced an outbreak of new COVID cases in early March, leading its capital, Changchun, to declare a new lockdown. FAW (Volkswagen, Toyota, Audi) plants had to suspend production of vehicles in mid-March, while a similar situation has been observed at Volkswagen and Tesla facilities in Shanghai in April.

  • Approximately 20% of China’s automotive production capacity has been affected by the recently announced lockdowns. Two major manufacturers whose total output is over 5.6 million units a year, Shanghai Automotive Group Co. Ltd (SAIC) and FAW, are now experiencing logistics and supply chain challenges, which will negatively affect Chinese automotive production in 2022.

  • As per the Chinese Association of Automobile Manufacturers (CAAM):

    • 2021 Q1 production was up 2% YOY, while sales were up only 0.2%.

    • March output hit 2.241 million units, while sales reached 2.234 million units, down 9% and 12% respectively YOY.

    • March EV output hit 465,000 units with sales of 484,000 units, a YOY increase of 110%.

    • March exports hit 170,000 units, shrinking 6% in comparison to February; YOY exports were up 29%.

  • The CAAM report says that the new lockdowns announced in March have dramatically impacted the automotive sector, putting huge pressure on the whole supply chain. The shortage of chips has not improved significantly, and the price of raw materials for power batteries is going up rapidly, which has further pushed up manufacturing costs and, consequently, final product costs. Automotive companies have been heavily affected, and expectations are that this scenario won’t change in the short term.

  • A new release from CAAM on May 11 shows the current scenario of the automotive sector in China, which has taken a major slide since the first quarter report above:

    • April output hit 1.205 million units, shrinking 46% YOY. Sales are down to 1.181 million units, shrinking 48% YOY

    • EV April output hit 312,000 units, shrinking 33% versus March but still shows a growth of 44% YOY. Sales reached 299,000 units, shrinking 38% versus March but growing 45% YOY.

  • The EV segment is still the main driver for automotive industry growth in 2022.

  • With the lockdowns announced in Jilin and Shanghai, FAW-Volkswagen, previously the No. 1 ranked automotive company in China, is now down to No. 2, while SAIC-GM and SAIC-Volkswagen are now down to third and fourth in the ranking, respectively.

  • In Shanghai, the automobile industry continues to be shut down. The core components for vehicle assembly in China, largely supplied by companies located in the Yangtze River Delta region, have had production levels heavily affected by the lockdowns.

  • Expectation are that this dire situation won’t improve until late July.

For more information, please contact Fred Qian at fredqian@AMTchina.org.

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Author
Fred Qian
General Manager - Shanghai Technology and Service Center of AMT
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