Sichuan power cuts won’t disrupt China’s auto sector despite certain impact: supplier
Published: Aug 22, 2022 09:17 PM
Aerial photo taken on June 23, 2022 shows a city view of Meishan, southwest China's Sichuan Province.(Photo: Xinhua)

Aerial photo taken on June 23, 2022 shows a city view of Meishan, southwest China's Sichuan Province.(Photo: Xinhua)

While many foreign media outlets have been hyping the impact of power shortages in Southwest China's Sichuan due to extreme weather on the country's auto supply chain, industry practitioners and analysts said on Monday that the impact on the industry as a whole is limited, despite certain disruptions. 

Several foreign media reports claimed on Monday that the power cuts in Sichuan, which is home to some auto parts manufacturers, could threaten operations of carmakers in Shanghai, including Tesla and SAIC Motor.  

Tesla and SAIC Motor declined to comment on Monday.

But industry insiders and analysts told the Global Times that the impact of Sichuan's power rationing on China's overall vehicle supply chain should be very limited, since Sichuan's vehicle and parts production accounts for only a small percentage of the national total.

An auto supplier based in East China's Jiangsu Province told the Global Times the production halt will mostly affect automobile industry chains in Southwest China's Chongqing Municipality. "The impact on other parts of China is almost negligible," the person said.

The person said that when automakers choose suppliers, they would take transportation costs into consideration and would be inclined to choose nearby suppliers under normal circumstances, unless there's no choice.

Data provided by Zhang Xiang, a research fellow at the Research Center of Automobile Industry Innovation of the North China University of Technology, showed that companies in Sichuan produced about 727,000 vehicles in 2021. In comparison, Shanghai produced about 2.83 million, accounting for about 10 percent of China's total automobile output. 

"China's important production areas for car parts are Shanghai and Changchun, not Sichuan. I haven't heard that Tesla or SAIC Motor halted production because of the power curbs in Sichuan," Zhang said.

According to Zhang, the impact of Sichuan's power cuts will be much less than that of the COVID-19 outbreak in Shanghai earlier this year when it comes to the car sector, as local governments warned companies in advance, which can use the lost production time for maintenance work, or just work extra hours later. 

Sichuan is home to automakers such as a subsidiary of FAW-Volkswagen, as well as a number of car parts firms.

The province, which is rich in hydropower resources and usually provides plentiful electricity for other parts of China, is suffering from the worst heat wave in decades. That's pushed up air conditioning use and drained water supplies for generating power.

The province of 84 million people on August 14 told 19 out of 21 cities to suspend factory production from August 15 to last Saturday, except for certain crucial maintenance enterprises. The suspension was later extended to Thursday.