Nothing like this has existed in China since living memory. According to the state government, large parts of the country are currently experiencing the hottest and driest summer in at least six decades. For weeks there is drought in several provinces – such as Jiangsu, Sichuan, Anhui and Zhejiang in the middle and south of the country. The Yangtze, the third longest river in the world, is at its lowest level. The hydroelectric power plants, which the river normally drives and on which the country is particularly dependent, hardly supply any electricity. At the same time, the demand for energy has increased due to record temperatures and the many air conditioning systems.
The result: Many companies are shut down by order of the authorities so that at least houses and apartments can be supplied. The state has paralyzed parts of the industry in the second largest economy in the world.
According to the German Chamber of Commerce in China (AHK), automotive suppliers are particularly affected by the German companies. “The lack of energy security poses major challenges for German companies in China,” says Jens Hildebrandt, executive board member of the AHK in China. Plants in Sichuan and Chongqing have been struggling to cut back since July.
In the case of the Stuttgart-based automotive supplier Robert Bosch, this meant that production had to be shut down. The Chengdu plant, where Bosch manufactures power tools, has been closed for days. Other plants that produce automotive components have already started up again. Otherwise, production is running, the company said at the request of manager magazin. Still, the effects are manageable.
Also Volkswagen feels the consequences of the emergency. A plant of FAW-Volkswagen Automotive in Chengdu and some of the car manufacturer’s suppliers are currently affected by the local power shortage. As a result, there are delays, the group reports and hopes to be able to make up for the losses in the near future. According to VW, the power shortage has no impact on business in Europe, as the group produces locally for China.
Government extends power throttling – the end remains open
Competitors from abroad like Toyota or Tesla, but also the Chinese car manufacturer SAIC are also complaining about power shortages. Japanese carmaker Honda Motor informed the agency Bloomberg
announced that its plant in the Chinese city of Chongqing will remain closed this week as the local government extended an order to curb electricity consumption and shut down operations. The policy was originally due to expire on Thursday. According to the Honda spokesman, every manufacturer in the region is subject to this order. It has not yet been decided when it will be lifted.
Rival Mazda has only been producing at night at a plant in Nanjing since mid-August to escape the heat and save electricity. A spokesman said it was not known when the processes would return to normal.
Production of lithium, copper, aluminum at risk
The failures exacerbate the tense situation in China’s economy. According to the AHK, growth in industrial production fell far short of forecasts at 3.8 percent in July. The production stops in the industrial sector are likely to further weaken the economy of the People’s Republic, which is already struggling with many problems due to the government’s zero-Covid policy and the real estate crisis.
Here, too, the car industry serves as an example. Even if the disruptions at factories may be short-lived, the impact could be felt for longer. The affected region of Sichuan is one of the largest suppliers of lithium, an important raw material for electric cars. More than a fifth of China’s lithium is produced here, according to BloombergNEF. The world’s leading battery manufacturer, Contemporary Amperex Technology Co. (CATL), whose second-largest manufacturing facility is located in the region, has already ceased production. The price of lithium carbonate already pushed to a four-month high last week. If the disruptions last longer and the already scarce raw material is not available, battery manufacturers in other regions could also be forced to reduce their production.
What is also likely to hurt the auto industry are the failure of deliveries from aluminum and copper producers. Energy-intensive manufacturing is particularly at risk as local governments seek to reduce power consumption. In early August, one of China’s largest copper producers, based in Anhui province, cut production as local authorities ordered power shutdowns. In the automotive industry, copper is mainly used in electrical parts. The aluminum used in the body often comes from the Sichuan region.
more on the subject
In addition to the automotive industry, the solar sector is also feeling the effects of the power shortage. Two factories of Jinko Solar, one of the world’s largest manufacturers of solar panels, are noisy Bloomberg
affected by the power outage. The company said it was unclear when the Sichuan facilities would be able to return to full capacity.