Breakingviews – China Covid-zero zeal puts carmakers into low gear – Reuters

April 12, 2022 by No Comments

A police officer in a protective suit keeps watch at an entrance to a tunnel leading to the Pudong area across the Huangpu river, after traffic restrictions amid the lockdown to contain the spread of the coronavirus disease (COVID-19) in Shanghai, China March 28, 2022. REUTERS/Aly Song – RC2KBT9493GE

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HONG KONG, April 12 (Reuters Breakingviews) – China’s Covid-zero zeal is forcing the world’s carmakers into a lower gear. Beijing’s harsh Omicron lockdowns are stalling supply chains read more while war cranks up costs . This year could be a rougher ride for the industry than 2020.

The country became ever more important for automakers as its initial success in fighting the virus allowed business to boom. Vehicle exports doubled from pre-pandemic levels to hit almost $35 billion in the 12 months to the end of June 2021, while exports of parts rose more than 40% to over $75 billion, according to Datastream. Major marques and their suppliers lent on the country’s factories to meet both international and domestic demand.

Tesla (TSLA.O) is the posterchild. The first car rolled out of Elon Musk’s Shanghai Gigafactory on the eve of the pandemic, with annual capacity up to nearly half a million vehicles last year. That allowed Tesla to double sales in the world’s largest market.

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But China’s commitment to curbing Covid-19 now puts all that at risk, because battling the highly contagious Omicron strain requires more stringent methods than in 2020. Lockdowns in Shanghai closed the Gigafactory for at least two weeks, with rivals from giant Volkswagen (VOWG_p.DE) to upstart Nio also halting production. Since the variant’s emergence in November, Tesla’s shares have fallen 20%, while those of General Motors (GM.N) and Volkswagen have lost more than …….

Source: https://www.reuters.com/breakingviews/china-covid-zero-zeal-puts-carmakers-into-low-gear-2022-04-12/

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