The main goal of any car company is to become a household name around the globe, not just in the country that they primarily operate in. For most, production occurs in a variety of different countries, and one of the major ones happens to be the globe’s rising superpower, China. China, being a major manufacturing hub, has proven to be a valuable asset to some of the largest car brands in the world.
Unfortunately, this link has proven to be negative in the past few months. As we got further into the pandemic, it felt like China was invincible from waves of the virus due to their swift reactions and protocols. However, the Omicron variant struck at the wrong time, causing mass lockdowns in major cities like Shanghai when inflation was getting to its worst in the world.
These lockdowns acted as a wrecking ball on car companies who hold manufacturing plants in the country. In China, car sales fell by 36 percent from a year ago, and production has fallen by 41 percent. The main company affected by this was Tesla, with their Shanghai plant suffering. From that plant, Tesla sold about 1,500 cars, which is a 94 percent decrease from last year, and exports fell to zero. Toyota was also forced to suspend production in its home country, Japan, due to a parts shortage caused by the lockdowns, and is predicted to reduce their global production by as much as 700,000 vehicles. This could play a major role in these businesses’ earnings reports, and car prices might have to increase to combat this. However, Musk said in a summit that he believes the Chinese government is rapidly removing lockdowns, dubbing this a short-term problem.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.