Kia Mexico Plant Shutdown Due to US Cold Wave

Automotive Industry Faces Vehicle Semiconductor Supply Shortage Followed by US-Originated Cold Wave Warning

Residents of Texas, USA, fetching water in a park due to water supply cut off by the cold wave
[Image source=Yonhap News]

[Asia Economy Reporter Changhwan Lee] The global automotive industry is suffering significant damage due to an energy crisis following a record-breaking cold wave in the southern United States. As the supply of U.S.-produced natural gas was disrupted by the cold wave, numerous automobile factories in Mexico have entered shutdowns (temporary work stoppages). Following the shortage of automotive semiconductors, the cold wave has further impacted the industry, leading to forecasts that global vehicle production this year will fall significantly below expectations.

According to the automotive industry on the 19th, factories of Kia, General Motors (GM), Volkswagen, and others in Mexico began shutdowns starting on the 18th (local time). Mexico heavily depends on U.S.-produced natural gas, and due to the winter cold wave that hit the southern U.S. and northern Mexico, Mexico has not been able to receive adequate natural gas supplies, making factory operations difficult.

On the same day, Kia announced that its factory located in Pesquer?a, Nuevo Le?n in northern Mexico had suspended operations. The Kia Mexico plant, completed in 2016, produces models such as the K2, K3, and Hyundai Accent. These vehicles are mainly sold in the North American and Latin American markets.

The shutdown of the Mexican plant is expected to cause some disruption to Kia’s vehicle sales in North and Latin America. A representative from Kia Mexico stated, "The factory suspended operations on the 18th and 19th and plans to resume next week. However, we need to monitor the natural gas supply situation."

GM also halted operations at its Silao plant in Guanajuato, Mexico, starting from the afternoon of the 16th. GM said it plans to resume operations once gas supply reaches an adequate level. German automaker Volkswagen announced plans to temporarily suspend production of the Jetta model at its Puebla plant on the 18th and 19th, and production of the Taos and Golf models on the 19th. Japan’s Mazda also stopped operations at its Salamanca plant, and Audi plans to reduce production depending on the natural gas supply situation.

Mexico Severely Impacted as Significant Portion of Power Generation Uses U.S.-Produced Natural Gas

Mexico relies on natural gas for 60% of its power generation and is known to import over 70% of its natural gas consumption from the U.S. and other countries.

The natural gas pipelines connecting the U.S. to Mexico froze due to the cold wave, causing large-scale blackouts and energy shortages in northern Mexico. To make matters worse, electricity consumption in the U.S. surged, causing the volume of natural gas supplied from the U.S. to Mexico via pipelines to drop to its lowest level since May last year.

The Mexican automotive industry has stated that factories are expected to resume normal operations next week, but if energy supply issues persist, factory shutdowns could be prolonged. Texas Governor Greg Abbott announced plans to ban natural gas supply outside the state until the 21st, raising concerns that Mexico’s energy supply difficulties may continue longer.

Analysts note that automakers are facing increased difficulties as they continue production cuts due to automotive semiconductor shortages while also experiencing energy supply shortages in North America. It is expected that vehicle production this year will decline more than anticipated, and companies’ profits will fall short of expectations.

Global market research firm IHS Markit predicted that due to the shortage of automotive semiconductors, about one million vehicles worldwide would face production disruptions in the first quarter alone this year. If the shutdowns at Mexican plants continue, production disruptions are expected to worsen.

This content was produced with the assistance of AI translation services.