China heat wave hits Tesla, SAIC as electricity rationing extended

Power rationing in Sichuan province, China’s most important hydroelectric hub, has hit production at Shanghai’s top automakers, including Tesla (TSLA)according to reports in Chinese state media.

Sichuan ordered most factories to close for six days until Saturday because of the extreme heat and drought that has caused an energy crisis. Since then, the shutdown has been extended for another five days.

SAIC Motor, China’s largest carmaker, and Tesla have informed the Shanghai city government that the energy crisis in Sichuan has disrupted supply chains and affected production at their factories in the city, according to reports.
Shanghai, which is about 1,200 miles from Sichuan province, is home to Tesla’s “Gigafactory,” which has already built one million cars for the American electric vehicle company.
SAIC has three major factories in Shanghai, including two joint ventures with volkswagen (VLKAF) i General Motors (GM).

Last week, the companies asked the Shanghai government to help their suppliers in Sichuan, which have been hit by power rationing.

According to official documents cited by Chinese state media, 16 auto suppliers in the region were unable to make enough parts last week due to power outages. The Shanghai Economic Planning Agency has asked Sichuan to increase the supply of energy to these companies, including Chengdu Yinli Auto Parts.

“SAIC and Tesla are the leading companies in Shanghai to build a world-class auto industry center and have established important supply partnerships with many auto parts companies in Sichuan province,” he said. the Shanghai government to Sichuan authorities, according to documents cited by Caixin. .
People visit the Taikoo Li shopping complex as the lights are partially turned off to save energy on August 18, 2022 in Chengdu, China's Sichuan province.

CNN Business has reached out to the Shanghai government and the two automakers for comment, but has yet to hear back.

China is facing its worst heat wave since 1961, with temperatures exceeding 40 degrees Celsius (104 degrees Fahrenheit) in more than 200 cities. The weather has caused the country’s crucial Yangtze River to shrink and brought drought to more than 70 cities.

Extreme heat and drought have led to increased demand for air conditioning and a drop in hydropower supply, putting strain on the power grid.

China dims subway lights in Chengdu to save energy as heat rises

Sichuan, which is a hub for manufacturers of semiconductors, lithium batteries and auto parts, closed most of the province’s factories last Monday. The local government said the move was to ensure enough power for residents.

The province extended the power outage by five more days on Saturday as high temperatures remained around 40 degrees Celsius while rains persisted. Electricity rationing has already affected large international companies.

Japanese car manufacturer Toyota (TM), which has a factory in the city of Chengdu, suspended operations at the plant last week, according to Reuters. The company did not immediately respond to a request for comment.
China's growth forecasts were cut as the heat wave hits industrial hubs
apple (AAPL) Supplier Foxconn’s factory in Sichuan has also been affected, although the company said the impact was “not significant”. BOE Technology, a major maker of LCD and OLED panels, also said last week it had to make “production adjustments” in Sichuan in response to the power outages.
Shanghai request for special treatment for its car manufacturers has sparked a backlash on Chinese social media, with many netizens calling it “inappropriate” and “shameless” at a time when tens of thousands of people in Sichuan are without electricity.
China’s automakers, including Tesla, had only just begun to recover from a months-long lockdown in Shanghai earlier this year that had affected their production and suppliers. Car sales saw a sharp decline in April, with Tesla sales dropping as much as 98% that month.

— CNN’s Beijing bureau contributed to this report.

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