(Bloomberg) — Volkswagen AG will close part of its factory in Shanghai because of the difficulty in procuring parts during the city’s lockdown, though it is also looking at ways to keep production running while the pandemic restrictions are in place.
The plant, operated in a joint venture with China’s SAIC Motor Corp., will partially shut down production Thursday, a VW spokesperson said, without providing further details including when it may be able to resume or what parts and models are specifically impacted. The company will provide information on a daily basis, the spokesperson said,
China’s adherence to a Covid Zero policy is wreaking havoc on global automakers. VW and Toyota Motor Corp., the world’s two largest automakers, suspended production at four plants in Changchun more than two weeks ago when the city 950 kilometers (590 miles) northeast of Beijing was plunged into lockdown to contain a Covid-19 outbreak, and say it’s unclear when workers will be able to return. That follows a near two-week shutdown of factories in Tianjin during an outbreak in January.
With Shanghai now in a phased lockdown, Tesla Inc. has suspended production at its Gigafactory for at least four days, a blow to the electric-car pioneer given China is the company’s second-largest market and the plant builds cars for export to Europe and elsewhere in Asia. Toyota’s bus and truck unit Hino Motors Ltd. has also paused production at its engine plant in the city.
Shanghai will adopt a strategy of “static management of the whole region,” according to a government statement. While the phrase has been used by Chinese officials to mean a strict lockdown in which residents are barred from leaving their homes, the Shanghai statement did not clarify the scope of any new measures.
Read more: World’s Top Carmakers Feeling Full Force of China Covid Stance
In a bid to keep its Shanghai plant running through the lockdown, VW had earlier asked workers to sleep onsite in a so-called closed-loop system, according to people familiar with the matter.
Staff were asked to prepare sleeping bags, camp beds or yoga mats and bring a two-week supply of essential medicine, said the people, who asked not to be identified because the information isn’t public. The arrangement is still being worked out alongside Shanghai government requirements and it’s not clear whether VW will be able to execute it, the people said.
The financial and business center, home to 25 million, is being locked down in two stages for testing after an omicron outbreak turned it into China’s main virus hotspot. VW’s plant is located to the west of the Huangpu River running through Shanghai — the side that will be locked down for testing from Friday.
China started allowing closed loops for some factories during a lockdown of the tech hub of Shenzhen earlier this month as a way of minimizing the economic hit. Companies including Apple supplier Pegatron Corp. and Semiconductor Manufacturing International Corp., China’s biggest chip producer, are said to have deployed the procedure — which is usually only allowed if staff live on the factory campus — during the first half of this week’s Shanghai lockdown.
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