Prolonged COVID-19 Lockdown in China... Warning of Expanding Supply Chain Crisis

Supply Chain Challenges for Automobiles Due to Lockdowns in Shanghai and Others
Concerns Over Production Halts at Battery Companies CATL and BYD

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] Due to the spread of COVID-19 in China, lockdown measures are continuing in major cities including Shanghai. Not only is logistics being halted, but production at key partner companies is also being disrupted, signaling a potential spread of damage to both local and domestic companies operating in the area.

According to the KOTRA Global Supply Chain Analysis Center on the 23rd, China’s automotive supply chain, home to the world’s largest automobile production base and numerous automotive battery companies, is currently facing difficulties.

First, CATL, the global market leader in electric vehicle batteries, and BYD, ranked third, are increasingly concerned about production stoppages. On the 9th, Ningde City in Fujian Province, where CATL’s headquarters is located, implemented lockdown-style control measures due to confirmed COVID-19 cases.

However, delivery orders have not been suspended, and it is reported that sufficient inventory for production has been secured despite the severe quarantine situation.

[Image source=Yonhap News]

The Shanghai Municipal Commission of Economy and Informatization, fearing production stoppages, announced on the 16th guidelines for resuming operations in industrial enterprises, prioritizing the resumption of operations for 666 key companies in industries such as automobiles and semiconductors.

Among these 666 companies, 251 (37.7%) are related to the automotive sector.

The Chinese government and companies are pushing for the resumption of operations at major production facilities, but conditions such as closed-loop management during production, comprehensive strengthening of employee quarantine management, and resolution of raw material logistics difficulties must be met. Because these conditions are stringent, only a limited number of companies can immediately resume operations, and it is expected that resumption will occur sequentially over time.

Our companies are also procuring some parts produced in China, and production is being affected due to the suspension of operations and logistics difficulties faced by Chinese companies.

Korea GM’s Bupyeong Plant 1 shifted from a two-shift to a one-shift operation due to difficulties in procuring Chinese-made brake system parts, and Gwangju Global Motors reportedly suspended operations for several days due to difficulties in procuring airbag parts.

Our government is also closely monitoring the local situation, concerned that if lockdowns expand to areas near Shanghai, the impact on domestic supply chains will increase.

On the 19th, the Ministry of Trade, Industry and Energy held a 'Meeting to Inspect Chinese Enterprises and Supply Chains,' sharing this situation while checking on corporate difficulties, supply chain status, and logistics impacts with trade officers from local Chinese missions and related agencies.

Joo Won-seok, Trade Officer at the Consulate General in Shanghai, reported, "Logistics functions at Shanghai’s ports and airports have significantly weakened. Although Shanghai is promoting the resumption of operations in key industries such as semiconductors and automobiles, considering quarantine and logistics conditions, it will take some time before full-scale production restarts."

Hong Chang-pyo, Head of KOTRA’s China Regional Headquarters, pointed out, "Our companies’ production bases in key industries such as semiconductors, batteries, and petrochemicals are concentrated in Jiangsu and Zhejiang provinces near Shanghai. If lockdown measures expand to these areas, the impact on supply chains could be significant."

Global Supply Chain Analysis Center.

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