Latest virus outbreak threatens auto rebound

SHANGHAI – As the semiconductor chip crunch eased, China’s light-vehicle sales approached 3.7 million in the first two months, an advance of 14 percent over 2021 and even exceeding the level in the same pre-pandemic period in  2019.

But the market expansion will be short lived as Beijing upholds a zero-tolerance policy to curb the spread of the coronavirus that has become increasingly transmissible and stealthy though mutations.

Despite stringent quarantine and travel rules, the number of locally transmitted daily infections across China surged to above 1,000 last week from below 100 in February. Nearly all of the new cases are caused by the highly transmissible omicron variant of the coronavirus, according to official statistics.

The infection levels are small compared with those in Western countries. But the outbreak is considered the worst since early 2020 when the pandemic took root.

As required by cities where infections are spiking, several major vehicle manufacturers have suspended output this week to allow employees to undergo nucleic acid tests. 

On Sunday, the south China megacity of Shenzhen, where BYD Co. -- China’s largest domestic electrified-vehicle maker -- is based, entered a week-long lockdown.

In Changchun, an industrial hub in northeast China, all automakers including Volkswagen Group and Toyota Motor Corp. are required to halt production for at least four days this week.

In Shanghai, China’s largest city, VW Group and Tesla Inc. were ordered to shut down production for two days. The same request may be applied to other automakers and suppliers as the Shanghai government combs one local area after another with mass nucleic acid tests.

Under current mitigation efforts in China, whenever someone tests positive for the coronavirus, all immediate members of the household, neighbors and workplace contacts must quarantine for at least a week.

That has created another major problem, understaffing, for companies in major cities such as Shanghai, even though the city hasn’t imposed a sweeping lockdown.

With a large number of infections detected during tests and even more people quarantined, most auto companies, dealerships and other businesses in Shanghai face staff shortages.

As of Wednesday, the latest coronavirus outbreak has spread to 28 of 31 provinces and municipalities in mainland China. 

Unless Beijing relaxes the draconian pandemic control rules, more cities are likely to force local companies to suspend operation and initiate mass testing, dealing another setback to the Chinese economy and disrupting the auto industry’s recovery.