China’s Covid-zero zeal is forcing the world’s carmakers into a lower gear. Beijing’s harsh Omicron lockdowns are stalling supply chains while war cranks up costs. This year could be a rougher ride for the industry than 2020, says KatrinaHamlin
There will be more to come. The city is an economic powerhouse, generating some $680 billion in GDP last year — roughly equivalent to Poland. Inflicting such harsh anti-coronavirus measures showed that policymakers have a high threshold for economic pain. That means manufacturing hubs like Guangzhou, Jilin and Shenzhen are all more likely to lock down than live with Covid-19 for the foreseeable future. China’s auto sales are also suffering, falling 11.
The timing is terrible. The outbreak of war in Ukraine has made life harder too. Automakers were already facing crippling shortages of key components such as semiconductors, as well as soaring prices for raw materials. Batteries, for example, cost as much as 20% more, according to Bernstein. For carmakers, the year 2022 might just be an annus horribilis to rival 2020.
- The value of vehicles exported from China grew 125% to $34.5 billion in the year ending June 2021, compared with 2019, according to Datastream. The value of auto parts exports rose 42% to $75.6 billion in the same period.Editing by Antony Currie and Thomas ShumOpinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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