China’s nascent reopening could take a bite out of the country’s most important auto sector.
The South China Morning Post (SCMP) reports that an outbreak of COVID-19 cases will hit China’s electrical industry, causing a loss of 600,000 sales in the first quarter of next year. Citing data from part-owned China International Capital Corporation (CICC), the report finds that the surge in cases will lead to production disruption and reduced demand.
All of this comes as China exits its zero-covid strategy and enters the new year. The CICC report predicts that the EV industry will deliver 1.5 million vehicles in the first quarter of next year, a 40% drop from the fourth quarter, where the industry is expected to deliver 2.1 million vehicles.
“The supply and demand sides of the industry will both be affected by the pandemic,” CICC analysts wrote in the SCMP. “The number of visits by buyers to their showrooms will also be less [than in previous months]”.
China’s auto sector, responsible for one in six jobs in China’s workforce, is already feeling some of the effects of the surge in Covid cases as the country eases restrictions. Tesla’s Giga Shanghai has reportedly extended its Christmas break by a day, and reports that workers at Tesla and its suppliers are falling ill amid a recent surge in Covid cases.
However, all is not lost for China’s automotive sector in 2023. The CICC report finds that by Q2, automakers operating in China will benefit from the government’s zero-covid policy. CICC said automakers such as BYD, Tesla, Nio and Li Auto have secured large orders in the future and sales could recover as soon as the epidemic subsides.
While the Q2 recovery is welcome news for the auto industry, not all analysts feel the same way. It may take the second half of next year to see if China is experiencing an economic recovery.
“The first two quarters of next year will also be critical as they will help us understand how long it will take for China’s economy to fully recover,” China Beige Book’s Shehzad Kazi told 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. “The Chinese economy, by all accounts, is very, very weak. this is not an overnight recovery story.”
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Pras Subramanian is a Yahoo Finance reporter. You can follow him Twitter: and on and on Instagram:.
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