Car production affected by virus, war and chip shortages

Carmakers continue to face challenges due to the global chip shortage, the Ukraine-Russia conflict and China's Covid-19 lockdown.

Tesla halted production at its Shanghai factory in China due to the city's Covid-19 lockdown Monday, according to a Bloomberg News report Tuesday.

Shanghai began a 9-day city-wide lockdown Monday to control the spread of Covid-19, according to a Chinese government release on Sunday.

The Shanghai factory is one of Tesla's two biggest production bases along with its factory in Fremont, California. It produced about 480,000 Model 3 sedans and Model Y SUVs last year, about half the number of vehicles delivered by Tesla in 2021.

Volkswagen and auto part suppliers have suspended manufacturing in Shanghai too.

Though the lockdown is set to last until next week, it will take more than a month for the factories to return to normal operations.

"China is currently implementing the strict zero-Covid strategy, locking down cities one by one," said a Korea International Trade Association spokesperson.

"It may take more than a month for the transportation network and other systems to return to normal, as city supply chains are intertwined," said the spokesperson.

Hyundai Motor and Kia didn't take a direct hit from the Shanghai lockdown, as they do not have factories or suppliers in Shanghai. However, the previous lockdown in Shandong in early March hampered the wiring-harness supply for the local carmakers.

Due to the wiring-harness supply shortage, Hyundai Motor's five manufacturing plants in Ulsan, South Gyeongsang, had to halt operations on two Saturdays. Some of the Ulsan plants operated on Saturday even amid the auto chip shortage, so the complete suspension of Saturday operations was considered unusual.

Kia had no Saturday operations for a whole month.

"Production at the Ulsan plants was cut by 30 percent this month, with about 8,000 vehicles delayed," said an industry insider.

Hyundai Motor was hit by an unstable supply of wiring harnesses in 2020 as well.

"We've diversified the supply outside China to Southeast Asia and other regions," said a Hyundai spokesperson, "so we are resuming the Saturday operation in some plants from this week."

Some production lines at Ulsan plants 2 and 5, where the Genesis GV70, GV80 and Avante are made, will restart Saturday operations this week.

The Ukraine-Russia war has hit the North American and European regions hard.

Volkswagen said last Friday it will delay the introduction of its all-electric ID.5 model by a month to May, as it couldn't procure wiring harnesses from its suppliers in Ukraine.

General Motors said Friday that its Indiana plant will halt operations for two weeks in April over chip shortages. Toyota cut its production goal for April to 750,000 units from 900,000.

Market tracker AutoForecast Solutions estimates that production of some 1.25 million vehicles was delayed due to the semiconductor chip shortage this year. The chip shortage led to annual production losses of 10 million vehicles last year.

"Chip shortages, the war and the pandemic have cut the number of cars — from home and abroad — available on the market," said Lee Ho-geun, a professor of auto engineering at Daeduk University, forecasting that "the car prices will keep rising since the waiting period will be more than a year."

BY BAEK MIN-JEONG [shin.hanee@joongang.co.kr]