China’s burgeoning reopening could take a bite out of the country’s all-important auto sector.
The South China Morning Post (SCMP) reports that a flare-up of COVID-19 cases will hit China’s EV industry, resulting in a loss of 600,000 sales in the first quarter of next year. Citing data from the partially government-owned China International Capital Corporation (CICC), the report finds that the surge in cases will lead to disrupted production and reduced demand.
This all comes as China abandons its zero-COVID strategy and enters the new year. The CICC report suggests that EV industry output will total 1.5 million deliveries in the first quarter of next year, which would be a 40% decline from the fourth quarter, where the industry is expected to will deliver 2.1 million vehicles.
“The demand and supply sides of the industry will both be impacted by the pandemic,” CICC analysts wrote, according to the SCMP. “The number of visits by shoppers to their showrooms will also be lower [than in previous months].”
China’s automotive sector, which accounts for 1 in 6 jobs in China’s workforce, is already feeling some of the impact from the rising number of Covid cases as the country eases restrictions. Tesla’s Giga Shanghai has reportedly extended its Christmas holiday by day reports suggest employees at Tesla and its suppliers got sick during the recent rise in Covid cases.
However, all is not lost for the Chinese auto sector for 2023. The CICC report shows that in the second quarter, China-based automakers will benefit from the government’s departure from the zero-COVID policy. CICC said automakers such as BYD, Tesla, Nio and Li Auto had secured large future orders and sales could recover once the pandemic eases.
While a recovery in the second quarter is good news for the auto industry, not all analysts feel the same way. It may take until the second half of next year to see whether China experiences an economic recovery.
“The first two quarters of next year will also be crucial because they will help us understand how long it will take China’s economy to fully recover,” China Beige Book’s Shehzad Qazi said in a statement. interview with Yahoo Finance.
“We’re in a pretty deep hole right now, especially when you look at the real estate market, it’s struggling,” he said. “By all accounts, the Chinese economy is very, very weak; this is not an overnight recovery story.