The latest supply-chain problem for the auto industry feels Biblical. A drought threatens the supply of parts in China.
(ticker: TSLA) and
(600104.China) have asked the Shanghai government for help dealing with a drought in Sichuan province, according to a report from Bloomberg. SAIC and
didn’t immediately respond to requests for comment.
One of the suppliers with capacity in the region is the largest EV battery maker in the world —
Contemporary Amperex Technology Co Ltd
(300750.China), better known as CATL. That company has idled some production in Sichuan, according to reports. CATL didn’t respond to a request for comment about the closures.
It’s easy for investors to see how battery supply and Chinese production can affect Tesla’s stock. Tesla generated roughly 26% of 2021 sales in China. What’s more, Tesla’s Shanghai plant is the company’s most productive assembly facility. The drought also could affect
GM and SAIC have a joint venture that produces a lot of small electric vehicles in China. GM didn’t respond to a request for comment immediately about the drought.
A reduction in the supply of parts would affect nearly all auto makers. The industry has dealt with a lot in recent years, including Covid-19 and a semiconductor shortage. Drought is just another issue in a long line of recent problems, and it isn’t the first act of God to hit the sector. Back in March 2021, a fire at a chip plant in Japan worsened the semiconductor shortage.
Managing supply chains these days has become more difficult than most people thought possible a few years ago.
Tesla stock was up 0.4% in late morning trading Thursday. GM stock rose 0.3%. The
was 0.2% higher, while the
Dow Jones Industrial Average
SAIC and CATL shares lost 1.2% and 0.4%, respectively, in overseas trading.
Write to Al Root at email@example.com