The impact of the epidemic is huge, the government and enterprises are actively coordinating rescue, but the depression of the automotive industry's supply system should not be covered up, and the supply chain thinking of the entire industry is facing reengineering after the epidemic
Text | Guo Yu Li Haoyin Li Yang Wang Jingyi Guo Huaiyi Zhao Cheng Intern Du Ruifeng
Edited by Li Haoyin
In the spring of 2022, when the new crown pneumonia epidemic struck, the two major automotive industry towns in northeast China and east China were forced to stop the assembly line day and night.
A car is made up of more than 10,000 parts, and it cannot be produced without any seemingly inconspicuous parts such as engine pistons and wipers. Ripples spread across the country, and China's auto industry is experiencing an unprecedented supply chain crisis.
From multiple dimensions such as production and consumption, automobiles are well-deserved pillar industries of China's economy, and since March, the core areas of China's automotive industry, such as Jilin and Shanghai, have been under the control of the epidemic for a long time. Shanghai has gathered a large number of overseas parts and components enterprise headquarters, huge throughput ports and scientific research institutes; Jilin has China FAW's five major OEMs, more than a thousand auto parts supporting enterprises. In addition to the factory shutdown, the logistics link is also blocked, the factory can not import and ship, and the butterfly effect eventually affects the Chinese automobile industry from the point and surface.
In addition, the shortage of key components such as chips is still the same, and the supply chain is still unresolved; from the cost of battery materials to the continuous rise in the prices of steel, rubber and aluminum alloys, in the face of high costs, car companies are forced to raise prices to cope. Pre-pandemic supply chains are already strained.
"This round of the epidemic has had a comprehensive and diversified impact on the domestic automobile industry, and the scope of the impact has spread from East China to the whole country and even overseas." Fu Yuwu, honorary chairman of the Society of Automotive Engineers of China, honorary chairman of the China Automotive Talent Research Association, and chairman of the Huaqi Automobile Culture Foundation, told Travel Yike (ID: carcaijing).
In the industry's view, the impact of this round of the epidemic on China's auto industry is likely to exceed that of the beginning of 2020. Cui Dongshu, secretary general of the Automobile Market Research Branch of the China Automobile Dealers Association (CARCAIJING), told Travel Passenger (ID: carcaijing) that due to poor production and consumer demand, it is expected that the national passenger car sales this year will be similar to the same period last year, that is, zero growth.
▲ Image source China Automobile Association Draft: Zhang Ling
▲ Image source China Automobile Association
With the severity of the epidemic eased, the automobile industry resumed work and production in mid-April, and production capacity gradually climbed. However, the resumption of work and production is not a switch, and it can be operated at high speed immediately when pressed. Automobile production is gradually recovering, still facing multiple tests such as personnel arrival, logistics obstruction, and the docking and adjustment of the needs of upstream and downstream enterprises.
On April 18, the national video conference on ensuring the smooth flow of goods and promoting the stability of the industrial chain supply chain was held in Beijing. Liu He, member of the Political Bureau of the CPC Central Committee and vice premier of the State Council, attended the meeting and deployed ten important measures, clearly proposing that it is necessary to issue and use a national unified permit in sufficient quantity; it is not allowed to restrict passage on the grounds of waiting for nucleic acid results; efforts should be made to stabilize the industrial chain supply chain, and leverage 1 trillion yuan of funds through re-loans in the fields of scientific and technological innovation and transportation and logistics; and the establishment of a white list of key enterprises and foreign trade enterprises such as automobiles and integrated circuits.
Confidence is more important than gold. In the industry's view, the darkest moment of this round of supply chain has passed. After all, from 2020 onwards, Chinese car companies have their own countermeasures, in extreme cases to ensure production, the determination and initiative of Chinese car companies have been proven in practice.
Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, told a passenger (ID: carcaijing) that the epidemic will always pass, and with the resumption of work and production, production can always be made up, but how to restore confidence on the consumer side is facing a lot of challenges.
Autonomous controllability and supply security have once again become major projects in the industrial chain. Enterprises should have bottom-line thinking, not only to deepen the depth of inventory and decentralized industrial layout on demand, but also to extend upstream and downstream at the same time to strengthen interconnection and collaboration.
The suspension begins: from Shanghai to Jilin, from the whole vehicle to the parts
Since March, there have been more than 200,000 cases of infection in this round of the epidemic in Shanghai, more than 15,000 new cases have been confirmed on April 20, and the city has been sealed and controlled for more than 20 days.
Over the past decade, Shanghai's contribution to national automobile production has remained at around 10%. According to last year's production level, the production capacity loss caused by the suspension of production for several major OEMs in Shanghai for one month is about 220,000 vehicles, accounting for about 9% of the national automobile production.
▲ Image source Shanghai Municipal Bureau of Statistics
The epidemic first affected the arrival of workers. At 5 o'clock on March 28, Shanghai, bounded by the Huangpu River, carried out a new round of nucleic acid screening in batches, and implemented closed management in the sealed area and residential areas, and all personnel stayed at home.
When workers could not reach the assembly line, SAIC's SAIC Passenger Cars, SAIC-GM, SAIC Volkswagen and other factories cut production or even directly suspended production, and Tesla suspended production at its factory in Shanghai from March 28. Some analysts pointed out that according to the average daily production capacity of 2,000 cars, the suspension of production will affect the production of nearly 40,000 Tesla vehicles, further extend tesla's car pick-up cycle, and then affect the terminal price.
Even if workers rush into the factory before the closure and start closed-loop production, the original inventory depth is not enough to maintain a long-term closed-loop management, and the supply supply chain is stopped, and the automobile supply chain is very fragile.
For a long time, the automotive industry has respected Toyota's "Just in time" zero inventory management strategy, suppliers build factories near the main engine factory, implement order-based production, and the inventory depth of the main engine factory parts is very low, free from carrying inventory and financial pressure. Depending on the product, the inventory retained by the car company for a few days to two weeks is enough for daily operation, and only a small number of parts may remain in inventory for two to three months.
This zero inventory and regional competitive advantage has become a disadvantage under the epidemic lockdown. Chen Jun, a senior market analyst at Wilson, told Travel One Passenger (ID: carcaijing) that the automotive supply chain built around Shanghai is extremely developed, and many small and micro enterprises are part of the supply chain, and the layout is in the surrounding areas, and the suspension of production affects the first-level parts suppliers and vehicle manufacturers layer by layer.
Xu Daquan, executive vice president of auto parts giant Bosch China, told Travel One Passenger (ID: carcaijing) that most of bosch factories in the control area are in a closed production state, and if they continue to seal and control, they will also face the risk of supply interruption; logistics problems are very serious, and the import and delivery are greatly delayed.
Jilin Province, 2,000 kilometers away from Shanghai, faces a similar situation. Since March, Jilin has reported more than 70,000 cases of infection, and as of 24:00 on April 19, Jilin Province has cumulatively screened more than 200,000 close contacts.
There are five vehicle manufacturing plants of China FAW, the first automobile manufacturer in New China, FAW Hongqi, FAW Jiefang, FAW Besturn, FAW-Volkswagen and FAW Fengyue, all gathered in the provincial capital of Changchun, in addition, more than 1,000 auto parts supporting enterprises including mainland China and Weipan are also distributed around.
In mid-March, FAW Group's five major vehicle plants in Changchun City stopped production due to epidemic prevention and control. On April 11, FAW Group resumed work in an all-round way.
According to the data of the Association, the average daily retail sales of major manufacturers in the third and fourth weeks of March were 35,000 units and 39,000 units, respectively, down nearly 30% year-on-year. According to caambilia data, passenger car production and sales in March were 1.881 million units and 1.864 million units, down 0.1% and 0.6% year-on-year, while automobile production and sales in the first quarter of this year were 6.484 million units and 6.509 million units, up 2.0% and 0.2% year-on-year.
"The impact of the epidemic is not only reflected in the production process." Gui Lingfeng, director of Kearney Management Consulting Greater China, told Travel One Passenger (ID: carcaijing) that the shutdown of the main engine factory is the ultimate embodiment, but the production and research process behind it, the supply chain, and even the entire value chain of the car including terminal sales are affected.
"R&D is not a closed door, and the environment and mechanism of multi-engineering and strong collaboration can ensure the traditional R&D cycle." Now the research and development cycle has been compressed to a very short, close to the extreme, if the core personnel temporarily changed to work from home, the impact on all aspects of product trial production and product sales is very far-reaching, perhaps the research and development confirmation link is one day late, which will lead to the last new car listing node a few weeks or even months later. In terms of logistics, some OEMs have replaced the storage base, which on the one hand involves huge costs, on the other hand, the epidemic cannot be hidden, and the capital occupation and opportunity cost are huge. In terms of sales, offline traffic decreases, and the cost of customer acquisition increases. Gui Lingfeng thought.
The butterfly effect shocked the national automotive industry
As the "chain main city" of the Yangtze River Delta automotive industry chain and the largest container port in the country, Shanghai sealing and control has produced a more violent chain reaction, from point to surface, from near and far.
He Xiaopeng, chairman of Guangzhou-based Xiaopeng Automobile, publicly shouted that if the supply chain enterprises in Shanghai and the surrounding areas cannot resume work smoothly, all domestic automakers will face the risk of suspension of work and production in May. Yu Chengdong, managing director of Huawei, CEO of the terminal business, and CEO of the Intelligent Vehicle Solutions Division, believes that technology and industrial companies involved in the Shanghai supply chain are at risk of stopping production in May, especially in the automotive industry.
▲ Image source He Xiaopeng Weibo
One of the reasons is that the Yangtze River Delta automobile industry enterprises in some segments show obvious market concentration, such as transmissions, new energy vehicle power batteries, drive motors, battery control systems, reducers, electronic appliances and other subdivisions, more than half of the suppliers gathered in the Yangtze River Delta region.
On the other hand, although the automotive industry mostly adopts the principle of "nearby procurement to reduce logistics costs", there are still many OEMs that take non-proximal supply of some parts and components with low punctuality requirements, and purchase from the Yangtze River Delta region through cross-regional transportation, and many head suppliers have production layouts in Shanghai, so the OEMs with high dependence on the supply chain in the Yangtze River Delta region have exposed their risk exposure to the Shanghai epidemic.
Trunk logistics are blocked, further deepening the difficulty of cross-regional procurement. Once the logistics is interrupted, it is difficult for qiao women to cook without rice.
Since the end of March, many places across the country have adopted different restriction measures, reducing toll stations and service areas, frequently checking passes, health codes and nucleic acid test reports, etc., which makes some trucks stranded at high speeds and some trucks parked and unable to get out of the local area.
"Raw materials can't come in, finished products can't go out, and workers can't use it when they arrive." On April 18, a senior executive of a parts company told a passenger (ID: carcaijing) that in order to transport raw materials in, he was forced to build a new transit warehouse in another province and make up a car to find a way to send it to Shanghai. The logistics cost from Ningbo to Shanghai has directly doubled several times. A vehicle with a pass was found and it ended up in the company's district, as it could not be released without a local pass.
Another employee of a parts company told a passenger (ID: carcaijing) that before the closure of Shanghai, the company's parts went on the highway, to the toll station, the other party saw that the vehicle came from Shanghai and did not let go, and finally the downstream car company could only call a forklift to unload the goods and transfer into the city, "the transportation cost is higher than the parts."
"Logistics is the main artery of the supply system, like our operation and sales can be transferred online, but the automobile industry is the real economy, if separated from logistics, our production capacity will have to face a sharp reduction." WM Motor told Chuxing Yike (ID: carcaijing) that almost all of the world's top 100 parts and components companies have set up factories in and around Shanghai, and the Shanghai supply chain system is in a fractured state due to the impact of logistics circulation.
According to the National Bureau of Statistics, the delivery time index for manufacturing and non-manufacturing suppliers in March was 46.5% and 45.2%, respectively, both of which are the lowest since the outbreak of the epidemic in February 2020. The lower the PMI delivery time index, the slower the delivery speed and the longer the delivery time.
In an interview with a passenger (ID: carcaijing), Great Wall Motors, GAC Group, Geely Automobile, Dongfeng DPCA, WM Motors, Dongfeng Nissan and other car companies have admitted that the epidemic in Shanghai, Jiangsu, Jilin, Guangzhou and other places has brought a certain degree of impact on the production, logistics and terminal sales of some of the company's suppliers. Some models have been forced to stop production; some car companies have tried to close-loop production, maintaining close communication and liaison with suppliers and logistics providers to adjust production scheduling and assess the actual impact.
When the chip supply crisis broke out, the relevant person in charge of BYD Automobile told a passenger (ID: carcaijing), "BYD has a complete industrial chain in chips, not only self-sufficient, but also has a margin, and we are also actively seeking external supply markets."
In the national supply chain crisis caused by the Shanghai epidemic, BYD, which has always claimed to be "self-sufficient", avoided talking about it in an interview with a travel passenger (ID: carcaijing). A BYD engineer told a passenger (ID: carcaijing) that "more or less there is still an impact, a car has tens of thousands of parts, BYD is not completely self-produced, such as brake energy recovery devices are purchased from Bosch."
Cars are highly integrated industrial products, and a car cannot be produced with one part. Weilai Automobile briefly stopped production from April 9 to April 14, CEO Li Bin said that due to the impact of the epidemic in Changchun and Hebei, some parts were cut off in mid-March, relying on inventory to barely maintain, encountering the epidemic in Shanghai and Jiangsu and other places, partners can not supply goods, can only stop production.
In theory, car companies have a backup plan, that is, to use the second and third backup suppliers. As long as the car company approves the products of multiple suppliers at the beginning of the project, prepares the mold in advance, and does a good job of product certification, the switching response speed will be very fast.
The cost of textbook operation is too high - if there was only a single supplier before, facing the outbreak of the epidemic need to be temporarily switched, due to the high degree of customization of parts, it will take several months to re-open the mold and product certification. For new car manufacturers whose production has not yet reached a certain scale, the alternative suppliers are extremely limited, and the pressure is even greater.
Relevant departments are actively introducing policies and measures to cope with the supply chain impact of the current round of the epidemic. Shanghai issued the Guidelines for the Prevention and Control of the Epidemic in Shanghai Industrial Enterprises resuming Work and Production on April 16, and 666 enterprises resumed work on April 18.
A globally renowned supply chain company executive told Travel One Customer (ID: carcaijing) that all oem customers have been more or less affected, and at present, most of the resumption of work is small-scale production, the problem is far from being solved, but there is hope.
The automotive supply chain is in jeopardy
▲ Image source surging image
If the epidemic is an unpredictable black swan, then the continuous increase in raw material prices and the shortage of key components is a long-standing gray rhinoceros. When the epidemic attracts everyone's attention, the old wounds in the automotive supply chain have long been healed.
In the spring of 2022, due to the continuous price increase of raw materials, there were two large-scale price increases in the automobile market. The first price increase was limited to the field of new energy vehicles, and in March, nearly 20 new energy vehicle companies announced price increases, involving nearly 40 models. Among them, Tesla raised prices three times in a week, with a single increase of up to 20,000 yuan.
The reason behind this refers to the increase in the price of raw materials for power batteries. Taking the core raw material lithium carbonate as an example, Chen Shihua told a passenger (ID: carcaijing) that "the price of lithium carbonate in January 2021 is about 50,000 yuan / ton, and in January this year, it has almost reached 400,000 yuan / ton, and the time of year has risen nearly eight times." The prices of rare metals such as nickel and cobalt have also risen sharply.
Fuel vehicles quickly followed in the footsteps of the price increase of new energy vehicles. On April 3, Mercedes-Benz announced an increase in the price of its fuel models across the board, up to 121,000 yuan. On April 12, BMW announced the adjustment of the price and configuration of five models on sale; on the same day, its own brand Weipai Automobile also adjusted the guidance price for the coffee models on sale such as Macchiato, Latte, and Mocha, with a range of 0.5 million to 12,000 yuan.
The reason for the price increase also comes from raw materials, Weipai Automobile CEO Li Ruifeng complained: "Now not only the cost of chips and battery materials continues to rise, but the prices of steel, rubber and aluminum alloys are rising, and it is indeed impossible to bear." ”
Large-scale price increases mean that the supply and demand of raw materials have been seriously imbalanced. Since the outbreak of the epidemic in 2019, the automotive supply chain has continued to be challenged, especially the chip supply problem, which is still a headache for car companies.
Chip supply cut-off first appeared in December 2020, when FAW-Volkswagen and SAIC Volkswagen were forced to stop production due to insufficient chip supply. At that time, Xu Haidong, deputy chief engineer of the China Automobile Association, told a passenger (ID: carcaijing) that "the tight supply of chips is mainly affected by the repeated epidemics, so that chip companies have not made too high predictions for this year's consumption, so that they have not prepared sufficient capacity supply in scheduling."
In the following year and a half, the chip famine continued to spread, during which there were many middlemen speculating, hoarding goods and other factors affecting normal supply, resulting in even if the overall production capacity has kept up, local supply is still insufficient.
Chip supply cuts highlight the shortcomings of the automotive supply chain – the impact and length of time can be largely attributed to the length of the production chain. A vehicle chip production cycle of up to 24 weeks - 26 weeks, there are design, manufacturing, packaging, testing four steps, involving multiple enterprises in many countries, once one of the links has an accident, the chip supply will be affected.
Until now, the supply of chips has not been alleviated, but has intensified. Feng Xingya, general manager of GAC Passenger Vehicles, has recently personally gone to parts companies to ask for parts and chips. Feng Xingya told Travel Yike (ID: carcaijing) that "the proportion of supply cannot be distributed according to the order volume two years ago, for example, Trumpchi is now in the market rising period, if the same order is allocated to the brand in the declining period, it will disrupt the market, and the products in the rising period should be allocated to more chips."
The boss came to the door to ask for chips, which is not a new thing. Previously, in order to ensure the normal production of versailles C5X models, Zhu Yanfeng, secretary of the party committee and chairman of Dongfeng Company, wrote a letter to Carlos Tavares, CEO of the joint venture partner Stellantis, to work together to find chips across borders.
Today, the production cuts caused by the epidemic have replaced the chip shortage as the number one crisis. Xu Daquan said, "Although the chip shortage problem still exists, the epidemic control has brought great challenges to the supply chain. ”
"Chips, battery raw materials and the epidemic have all brought challenges to production, and supply is now an industry problem." Dai Kangwei, general manager of BAIC Blue Valley and general manager of BAIC BJEV, told Chuxing Yike (ID: carcaijing), "In the past, it was a step-by-step production, and the resources of the supply chain were very stable, so we did it according to the production plan." But it's time to dig further down because there's so much uncertainty in the supply chain. Before, we only touched Tier1, but now I don't know how many layers it is, even fabs have to be exposed. ”
Government enterprises are actively helping themselves
▲ Image source surging image
The change begins in mid-April.
On April 11, Sun Jian, director of the Department of Industry and Information Technology of Jilin Province, said that China FAW has fully started to resume work, while the first batch of 47 parts and components companies are resuming work in an orderly manner. This means that China FAW's five major vehicle plants in Changchun have been shut down for nearly a month and started again.
On April 16, the Shanghai Municipal Commission of Economy and Information Technology released the first batch of 666 enterprises "white list", and the listed enterprises can take the lead in resuming work and production after meeting the epidemic prevention requirements. Among the 666 enterprises, automobile and supporting enterprises accounted for the largest proportion, about 40%. On April 19, Tesla's Shanghai Gigafactory officially resumed work and production after three weeks of suspension, and production capacity gradually climbed.
"Shanghai auto people have a sense of responsibility and a fighting spirit, overcome all kinds of difficulties, and ensure closed-loop production." Fu Yuwu said that the resumption of work and production in Shanghai is the best news heard recently. Automakers and parts suppliers are each showing their ability to help themselves.
Many automakers stuck to their posts during the epidemic lockdown. Before the sealing of Shanghai Pudong on March 28, more than 170 employees of Shanghai Shenli Technology Co., Ltd., a supplier of hydrogen energy and fuel cell products, hurriedly bid farewell to their families and came to the company to ensure the progress of research and development and production, and since then, it has become common to make bunks and sleeping bags, and the company has temporarily built a shower room, due to the limited number of electric water heaters, employees take a shower in shifts from morning to night.
"We have a total of 400 people, and only half of them are recalled, which is also worried about the risk of 'group annihilation'." Zhou Bin, deputy general manager of Shanghai Shenli Technology, recalled to a passenger (ID: carcaijing) that as soon as he saw the news that night, the staff on duty immediately went out to purchase, and the production personnel rushed back to the factory.
There are many multinational suppliers headquartered in Shanghai, groups and factories, BASF, Continental and other companies in accordance with the requirements of the Shanghai government, adhere to the closed-loop management, as far as possible to ensure the normal development of customer supply and business.
Many enterprises have established temporary emergency supply teams. Geely Automobile CEO Gan Jiayue told Travel One Passenger (ID: carcaijing) that an internal supply special group has been set up to flexibly adjust the production plan and assist suppliers in corresponding closed management and contactless transportation to reduce adverse effects. More and more parts companies have set up emergency teams to coordinate and solve problems such as supply chain and customer supply assurance, and dispatch and transport finished and semi-finished products between factories and logistics distribution centers.
Today, the policy-oriented resumption of work and production is underway, and more front-line workers are returning to their jobs and entering closed-loop production.
"The preparation of the unit is very sufficient, work, meals, accommodation are grid management, very detailed. After work, I live in the unit, several people in a room, the beds are spaced 2 meters apart, and the units used for things are uniformly issued. The original dine-in food was changed to a box lunch, the meal standard was doubled than the original, there were many varieties, and fruit milk, which was very hearty and free. For everyone's safety, the unit arranged for us to do nucleic acid and kit self-tests once a day, and there is not a single case positive at present. An employee of a car company in Northeast China said to a passenger (ID: carcaijing).
Resuming work and production does not only require closed production in a certain place, but also requires upstream and downstream to resume work together, first transporting parts in, and then shipping out finished products. "OEMs will resume production later than suppliers, and there will be a climbing period after the resumption of production." An employee of SAIC Volkswagen told Travel One Passenger (ID: carcaijing) that many of SAIC Volkswagen's suppliers are in East China, but at present, the supply of parts in East China has stopped, "even if we want to produce, it is difficult, even if we resume production, we have to wait for the upstream parts companies to recover."
However, to solve the problem of logistics obstruction, enterprise self-help is only the foundation, and industry collaboration is more needed.
Unable to receive samples by courier, SAIC Passenger Car Quality Assurance Department thought of "video inspection". Using SAIC Passenger Vehicle iLink digital platform, employees of SAIC Passenger Vehicle Quality Assurance Department evaluated samples and plate making schemes through remote high-definition video, and urged suppliers to continuously improve, and determined the follow-up work plan during the epidemic.
The aviation "green channel" is also one of the solutions. On the morning of April 19, from the Shanghai Pudong Airport Cargo Station, the Pudong Airport China Eastern Airlines Logistics Cargo Station and the First Supervision Warehouse of Pudong Airport Customs, through the "green channel" mechanism, asML, Mercedes-Benz, Bosch and other European enterprises produced and airlifted to Shanghai, the industrial chain materials were quickly delivered to The Shanghai Zhangjiang Park and kunshan, Wuxi, Hangzhou and other related enterprises in the Yangtze River Delta.
"I hope to release logistics as soon as possible," an executive of a parts company affiliated with a central enterprise told Travel Yike (ID: carcaijing) that it is difficult to send Shanghai materials to Jiangsu, but fortunately found a curved and roundabout road, and transferred the materials to Jiangsu through Zhejiang. He looks forward to the logistics in the Yangtze River Delta being restored as soon as possible, so that raw materials can come in and finished products can go out.
Gan Jiayue added that at present, there is the shortage of core-related parts and components, and implores relevant government departments to increase support for the smooth flow of goods and the stability of the industrial chain and supply chain under the premise of epidemic prevention and control.
Things are getting better. On April 19, Wu Chungeng, director of the Highway Bureau of the Ministry of Transport, said that the traffic flow, especially the truck traffic, has been slowly rising across the country and the Yangtze River Delta region. On April 21, the Jilin Provincial Government held the 42nd press conference on the epidemic prevention and control work, proposing four measures, such as simplifying the inspection procedures for returnees to work, effectively and orderly resuming transportation services, and smoothing logistics and transportation channels.
On April 22, Zhang Wei, vice mayor of Shanghai, publicly stated that the degree of poor logistics is highly correlated with the development of the epidemic. Under the guidance of the joint prevention and control mechanism of the State Council, Shanghai has taken various measures to rebuild mutual trust in the flow of goods and improve logistics efficiency.
Wu Jincheng, director of the Shanghai Municipal Commission of Economy and Information Technology, pointed out that Shanghai will improve the layout of highway nucleic acid testing points and accelerate the implementation of truck drivers' "that is, picking, walking, and chasing". Continue to pay attention to the problem, make every effort to coordinate and solve it, and ensure the normal operation of the core functions of the port and airport and the smooth flow of cargo.
On April 22, a passenger (ID: carcaijing) learned from people in the digital parts industry that Shanghai's outward trucks are much easier to find, that is, the price is not cheap and fluctuating, not all companies can digest this cost; shipping is gradually smooth, and the price increase is relatively controllable. However, there are still cases of different access standards between different cities.
Deloitte China Automotive Industry Leader Zhou Lingkun told Travel One Passenger (ID: carcaijing) that with the improvement of the epidemic and the resumption of production and logistics activities, the lost production capacity of the main engine factory can be compensated for by adjusting the production shift system and production beat in the subsequent months. At present, the gradual resumption of work plan of Shanghai auto parts enterprises is also partly aimed at ensuring the supply of car companies outside Shanghai.
The new world after the epidemic: adjust the supply chain layout, and car companies accelerate strategic extension
"In the past two days, I have exchanged with many leaders of car companies in the sealing and control area, and when we see the central and local support for the resumption of work and production, we are very comforted. The future of China's auto industry is bright, and we are full of confidence. Fu Yuwu said.
"The darkest hour has passed." A fund manager of a public fund told Travel One (ID: carcaijing) that the capital market is concerned about expectations, everyone feels that the future will gradually improve, and confidence is more important than gold. She said that after this round of impact, OEMs will pay more attention to supply chain management. Domestic parts and components enterprises have ushered in a window of development.
The first issue before us is inventory. When the Tesla factory resumed work on April 19, it said that there was still about a week of inventory of the vehicle parts, and if the supplier could not resume work synchronously or the logistics could not be smoothed, the inventory would undoubtedly be forced to stop production again after the inventory was exhausted. The risks of exclusive suppliers are also particularly acute during the pandemic.
Toyota, which first advocated zero inventory, also because the supply chain was exposed to vulnerability during the Japanese earthquake, changed to the model of deeply binding suppliers, and participated in the holding of enterprises in the supply chain to ensure absolute discourse power and enhance the resilience of the supply chain.
Dai Kangwei said that there is too much uncertainty in this year's supply chain, and car companies must identify which are the core resources, how to establish long-term cooperative relations with the core resources and how to layout. In order to ensure supply, OEMs have extended their handles to upstream suppliers layer by layer.
Li Shaohua, deputy secretary-general of the China Association of Automobile Manufacturers, told Chuxing Yike (ID: carcaijing), "In the past two years, car companies have been doing strategic extensions of the industrial chain, investing in chips, motors, batteries, software, control systems, etc., doing more than traditional parts in new fields, and overall enterprises are doing in-depth layout of the supply chain."
Some people believe that in the future, enterprise production will be decentralized and distributed. Zhou Bin told Travel One Passenger (ID: carcaijing) that Shenli currently only has a factory in Shanghai, and after this epidemic, it will take into account geographical differences and risk tolerance, so as to cope with extreme situations.
As long as there is demand from vehicle companies and local governments are willing to provide support, the production capacity of parts companies will inevitably migrate with demand. Zhang Junyi, managing partner of Oliver Valve Consulting, explained to Chuyike (ID: carcaijing) that this can not only ensure the production rhythm of parts companies, but also share the cost. A clear example is that battery companies have been laid out nearby. Many OEMs are also willing to establish joint ventures with battery companies to establish closer cooperative relations.
According to the McKinsey Global Supply Chain Leaders Survey, 73% of companies are not satisfied with the pre-epidemic supply chain layout and said that they will respond by increasing the inventory level of key materials and multi-source procurement; 89% of enterprises recognize the importance of improving supply chain resilience and will continue to monitor the risks at both the supply and demand ends to respond in advance.
McKinsey suggests that through the establishment of emergency management of crisis command centers, to regular self-checking of the sustainability of existing businesses and making plans, to strengthen supply chain resilience from the perspective of top-level design, that is, short, medium and long dimensions, establish a long-term mechanism to prepare for unexpected situations.
Zhou Lingkun believes that through technical means such as artificial intelligence big data, multi-level supply relationships can be penetrated to improve supply chain transparency, quickly identify the impact of black swan events on the supply chain of enterprises, and evaluate reconstruction time and supply chain reconstruction plans.
Focusing on supply chain security is not only reflected in production, but also in the design process. For example, car companies need to pay more attention to the research and development of new cars on the common platform, so that different models can use standard parts as much as possible, improve the versatility of parts exchange, further emphasize modularity, reduce the variety of parts, and thus reduce the number of suppliers and spare parts. This allows you to focus on the production of key components and reduce the pressure of supply assurance.
Some people believe that the epidemic needs to reduce crowd gathering, which will help car companies accelerate the automation rate and build a "black light factory". In this regard, Gui Lingfeng said that in the short term, car companies should give priority to how to resume work and production, ensure product profitability and other survival issues; in the long run, the manufacturing industry has the role of an employment reservoir, the head car companies can not be completely cost-oriented, and taking care of employment is part of corporate social responsibility.
Catalyzed by the epidemic, foreign investment and the transfer of production capacity will become new challenges. Some foreign parts and components companies told Travel One (ID: carcaijing) that the headquarters intends to slow down investment in China. Gui Lingfeng also said that today's black swan event has been extreme beyond the scope of the previous stress test, and foreign capital will either flow out or reduce investment, which is an irreversible opportunity cost.
Li Shaohua said that the reconstruction of the global industrial chain brought about by the epidemic and international relations in the past two years has made enterprises pay more attention to supply chain security in addition to industrial chain security. Enterprises are more inclined to invest in the investment process, from the micro perspective of enterprises, to be able to cope with the basic guarantee of smaller regions; from a macro point of view, it will help to promote the improvement of the domestic supply chain system.
On April 10, the "Opinions of the CPC Central Committee and the State Council on Accelerating the Construction of a Unified National Market" was issued, proposing to accelerate the establishment of a unified national market system and rules, break down local protection and market segmentation, open up key blockages restricting the economic cycle, promote the smooth flow of commodity factor resources on a larger scale, and accelerate the construction of a national unified large market that is efficient, standardized, fair competition, and fully open.
This advanced design and layout is crucial to China's automotive industry. Cui Dongshu analyzed that this will help reduce local protectionist barriers and reduce the cost of cross-regional resource circulation and transactions, which is crucial for the automotive industry that radiates the whole country and has a long upstream and downstream chain.
Fu Yuwu believes that independent controllability and supply security will once again become a major project in the industrial chain. To this end, enterprises should have bottom-line thinking, not only to deepen the depth of inventory and decentralized industrial layout as needed, but also to extend upstream and downstream at the same time to strengthen interconnection and collaboration.
Experience since 2020 has proved that Chinese car companies have always shown strong determination and initiative in the face of black swan events such as the epidemic, and strive to ensure production in extreme cases. However, the shortage of chips and other shortcomings still need to be solved, and how to stabilize the security of the long-term supply chain after spending short-term problems is an eternal issue for car companies.
(Deng Yujie, an intern of this journal, also contributed)