When Tesla’s Shanghai plant and other car factories were shuttered over the past two months for 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 him Shanghai lockdown enters its fourth weekand similar measures imposed in dozens of smaller cities, the world’s largest booming electric car market has gone bankrupt.
Other companies, from luxury-goods makers to fast-food restaurants, also offered a first read on lost sales and mistrust in recent weeks, even as Beijing rolls out measures to help COVID-hit industries and stimulate demand. .
Joey Wat, CEO of Yum China, which owns KFC and Taco Bell, said in a letter to investors that April sales had been “significantly affected” by COVID controls. In response, the company has streamlined its menu, streamlined staffing and promoted bulk ordering for locked-down communities, he said.
The pressing question now is: how and when will Chinese consumers start buying everything from Teslas to tacos again?
In China’s once-hot electric vehicle market, the recent turmoil is a stark example of an economic double whammy, first to supply and then to demand, from Beijing’s hard-line implementation of COVID controls. in the second largest economy in the world.
Before Shanghai was locked down in early April to contain an outbreak of COVID-19, sales of electric vehicles had been booming. Tesla’s sales in China rose 56 percent in the first quarter, while sales of electric vehicles by its biggest rival in China, BYD, increased fivefold. Then came the lockdowns.
Showrooms, shops and malls in Shanghai were shuttered and its 25 million residents were unable to buy much more than food and daily necessities online due to delivery bottlenecks. Nomura analysts estimated in mid-April that 45 cities in China, accounting for 40 percent of its gross domestic product (GDP), were under full or partial lockdowns, with the economy at increasing risk of recession.
The China Passenger Car Association estimated that retail passenger car deliveries in China were 39 percent lower in the first three weeks of April than a year earlier.
COVID control measures reduced shipments, car dealers refrained from promoting new models and sales fell in China’s wealthiest markets Shanghai and Guangdong, the association said.
A dealer for a German premium car brand in Jiangsu province, which borders Shanghai, told the Reuters news agency that sales fell between a third and a half in April, citing blockades and bottlenecks in trucks that made it difficult to deliver orders.
He said he was even more concerned about the effect on consumer purchasing power, and refused to give his name because he was not allowed to speak to the media.
“It could be worse than the first wave of COVID in 2020, when the economic recovery was fast and strong. Today there are more uncertainties in the economy, and the stock and real estate markets are not doing well,” he said.
“Much will depend on how quickly these restrictions can be lifted, but the next few weeks may be difficult,” Helen de Tissot, chief financial officer of French spirits maker Pernod Ricard, told Reuters on Thursday.
Kering, which owns luxury brands such as Gucci and Saint Laurent, said a “significant portion” of its stores had been closed in April.
“It’s very difficult to predict what will happen after the closing,” said Jean-Marc Duplaix, Kering’s chief financial officer.
Apple also warned about its latest results on COVID-affected demand in China.
City authorities from Beijing to Shenzhen are trying to stimulate demand by handing out millions of dollars worth of shopping vouchers to encourage residents to spend.
On Friday, Guangdong, a manufacturing powerhouse with an economy larger than South Korea’s, launched its own incentives to try to restart sales of electric and plug-in hybrid vehicles.
These include subsidies of up to 8,000 yuan ($1,200) for a select range of what China classifies as “new energy vehicles”, including Volkswagen and BYD. Tesla, second in electric vehicle sales in China, was excluded from the subsidy program.
The US automaker did not respond to a request for comment.
Chongqing, another auto manufacturing hub, said in March it would offer up to 2,000 yuan ($300) in cash to buyers who trade in old cars for new models and set aside another $3 million for other measures to stimulate sales.
While noting such measures, Credit Suisse analysts still said they believe COVID control measures have put online and offline consumption into a downward spiral.
“We see the consumer sector at great risk if the protracted pandemic and further tightening continues in China,” they said in an April 19 research note.