Beijing’s stringent COVID hard line disrupts commerce, from EVs to tacos

SHANGHAI — When Tesla Inc.’s Shanghai plant and other auto factories were shut over the last two months by emergency measures to control China’s biggest COVID-19 outbreak, the burning question was how quickly they could restart to meet surging demand.

But with the Shanghai lockdown grinding into its fourth week, and similar measures imposed in dozens of smaller cities, the world’s largest boom market for electric vehicles has gone bust.

Other companies from luxury goods makers to fast-food restaurants have also offered a first read on the lost sales and shaken confidence in recent weeks, even as Beijing rolls out measures to help COVID-hit industries and stimulate demand.

The pressing question now is: how and when will Chinese consumers start buying everything from Teslas to tacos again?

In China’s once-hot EV market, the recent turmoil is a stark example of a one-two economic punch, first to supply and then to demand, from Beijing’s hard-line implementation of COVID controls across the world’s second-largest economy.

Before Shanghai was locked down in early April to contain a COVID-19 outbreak, sales of EVs had been booming. Tesla’s sales in China jumped 56 percent in the first quarter, while EV sales at its larger rival in China, BYD, quintupled. Then came the lockdowns.

Showrooms, stores and malls in Shanghai were shut and its 25 million residents were unable to shop online for much beyond food and daily necessities due to delivery bottlenecks. Analysts at Nomura estimated in mid-April that 45 cities in China, representing 40 percent of its GDP, were under full or partial lockdowns, with the economy at a growing risk of recession.

China’s factory activity contracted at a steeper pace in April as widespread COVID-19 lockdowns halted industrial production and disrupted supply chains, raising fears of a sharp economic slowdown in the second quarter that will weigh on global growth.

The official manufacturing Purchasing Managers’ Index fell to 47.4 in April from 49.5 in March, in a second straight month of contraction, the National Bureau of Statistics said on Saturday. That was the lowest since February 2020.

The reopening of auto assembly plants has been spotty and the outlook remains cloudy.

Toyota Motor Corp. reopened a joint-venture plant in Changchun, which had been suspended since mid-March, as the Chinese city’s lockdown measures were eased, Kyodo news said on Sunday.

The Japanese automaker plans to resume regular operations on Wednesday, the report said, citing an unnamed source.

The China Passenger Car Association estimates retail deliveries of passenger cars in China were 39 percent lower in the first three weeks of April from a year earlier.

COVID control measures cut into shipments, car dealers held back from promoting new models, and sales tumbled in China’s richest markets of Shanghai and Guangdong, the association said.

One dealer of a premium German car brand in Jiangsu province, which borders Shanghai, told Reuters sales plunged by one-third to half in April, citing lockdowns and trucking bottlenecks that made it difficult to deliver orders.

He was even more worried about the impact on consumer spending power, he said, declining to give his name as he was not permitted to speak to the media.

“It could be worse than the first wave of COVID in 2020, when the economic recovery was quick and strong,” he said. “Nowadays there are more uncertainties in the economy, and the stock and property markets are not doing well.”