Automakers are opting to shutter plants in China as COVID restrictions make it almost impossible to secure some components, deeming even the closed-loop systems promoted by officials as a way to maintain manufacturing during lockdowns untenable.
Volkswagen Group on Monday said a component shortage was the main reason behind a decision to halt production at a joint venture plant that it has with China FAW Group Co. in Chengdu and two of five production lines at its factory in Changchun. The German automaker doesn’t have an estimate for when output will resume and has no plans to create closed loops, a spokesperson said.
The unpredictability of China’s restrictions, especially as outbreaks reach record levels, means automakers such as VW are currently confronted with significant supply-chain uncertainties, people familiar with the situation said, asking not to be identified because they’re not authorized to speak publicly.
Without a stable and steady supply of components, it’s difficult to make any production plans, let alone move to closed-loop systems that would keep plants running, the people said. Chinese electric-vehicle company Xpeng Inc. faces a similar challenge, according to a person familiar with its situation. Li Auto Inc. has delayed the delivery of two models because of component shortages, the Beijing-based carmaker said in a statement Monday.
A spokesperson for VW said its Chengdu and Changchun plants were impacted by COVID-related supply chain disruptions but “the overall supply to other facilities in China at the moment is quite stable.”
Xpeng didn’t immediately respond to requests for comment.
First used during the Beijing Winter Olympics as a way of keeping athletes and support staff separate from the wider population, closed loops were meant to be the panacea that would keep China’s economy chugging even as Covid restrictions limited movement. While they were effective in helping companies like Tesla Inc. restart output during the Shanghai lockdown in the spring, the systems have become less tenable the longer the pandemic endures, with workers separated from their families and the outside world long term.