China's Covid-Zero policy makes global automakers halt factories
With China's implementation of the Covid-Zero policy, disruption in the work schedule of global automakers has been noted. As the omicron variant has started to spread in the country, factories of top auto companies located in Tianjin, southeast of Beijing, have been on pause as the local government is carrying out multiple rounds of mass testing.
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Automakers such as Toyota Motor Corp. and Volkswagen are facing hurdles while trying to carry on manufacturing smoothly as the country has imposed strict quarantine and mass testing rules to keep the infection numbers low. Auto companies are concerned as these might slow down production in the coming months. The brands also believe that these stern rules could further put stress on the already tight supply chain given the fact that China is the world's largest automobile market.
Toyota’s venture with China FAW Group Co. in Tianjin has sealed off some neighbourhoods due to the detection of Covid infections. The joint operation has an annual production capacity of more than 5,00,000 vehicles. Volkswagen conveyed that its factory on the other side of the city, which produces around 3,00,000 cars a year including the Audi Q3, has been temporarily shut down due to parts shortages and pending test results of workers.
A gearbox supplier controlled by Volkswagen and Rohm Co. were among operations that were halted last week. Some shifts at the former's component factory resumed on January 13. The German automaker said it hopes to catch up with lost production.
Analysts at Fitch Solutions have stated this will have a global impact given the country's role in the auto supply chain. They also added that the lockdowns will affect the automakers indirectly as well as their wider supply chains. The organisation reckon that the recovery of global vehicle production might now be delayed until 2023 because of the surge in omicron cases and local lockdowns.
(With inputs from Bloomberg)