Some parts of China have been experiencing record high temperatures in the past few weeks, prompting local governments to halt the use of industrial energy, including battery stations.
When the news hits the West, it generates fear-mongering headlines like “China heat wave shutting down Tesla suppliers” that potentially worries investors (because Tesla is all we care about, isn’t it?). But is the electric car giant really suffering from the scorching heat of China?
First, we need to look at the affected factories. Lithium battery giant CATL is among the companies ordered to halt production in the landlocked Sichuan province, according to a local media report. The shutdown, which will last from August 15 to 20, comes as part of the governorate’s efforts to ration electricity in light of its suffering from a drought and a devastating heat wave.
While CATL, a major supplier of batteries to Tesla, may have trouble meeting some customer demands, there is no indication that Tesla is bearing the cost. For example, CATL has production plants all over China, from Guangdong and Jiangsu to Shanghai, so a temporary regional respite – although six days may seem long in the auto industry – is unlikely to lead to the collapse of billions of businesses Dollars Well – The Oily Supply Chain.
Suppliers are also likely to prioritize demand coming from Tesla due to its reputation and sheer size. The US company was the third-best-selling electric car maker in China in the first half of 2021, according to the Association of the Automobile Industry.
“In China, Tesla is just as privileged as Apple with all the manufacturers claiming to be their supplier. Even if production is restricted, it is very likely that suppliers will prioritize Tesla’s orders while putting others on hold,” one Tesla parts supplier told TechCrunch .
The supply chains for Tesla and its local EV competitors like Xpeng and Nio are concentrated in manufacturing centers around the Pearl River Delta, which includes major cities like Guangzhou and Shenzhen, as well as the Yangtze Delta, which is home to Tesla’s Gigafactory in Shanghai and dozens. From chip makers around Suzhou, an employee of a Chinese EV startup pointed us out.
Shanghai has been a victim of the recent heatwave in China, although there are no indications that the weather is halting production at the Gigafactory yet.
Shanghai already went through rough times in the spring when a two-month outbreak of COVID-19 forced the Gigafactory to halt production twice.
Specifically, due to sporadic shutdowns caused by COVID over the past two years, the Tesla supplier said, “suppliers have become more resilient.” “Many major manufacturers are stockpiling supplies to create a buffer for the COVID shock absorbers.”
Finally, it is worth noting that China is gathering strength to recover its stagnant economy at any cost. It is likely that industries that have been ranked as top priorities for the state’s scheme, such as the electric car sector, will receive more support when resources are limited.
As the heat wave tests the country’s ability to continue industrializing, Vice Premier Hang Zheng highlighted ” The importance of energy and energy supplies for social and economic stability.”
“The country will also strengthen policy support and take multi-pronged measures to help related enterprises cope with difficulties,” Han added.