LAULY LI, CHENG TING-FANG and SHUNSUKE TABETA, Nikkei staff writers
TAIPEI/BEIJING — Toyota and other big automakers are bracing for supply chain disruptions as China prepares to curb industrial activity next year to ensure clear skies for the 2022 Winter Olympics.
Toyota, the world’s biggest automaker, has told suppliers in China to have more than one month of inventory on hand and to move some production of components out of Beijing and surrounding provinces ahead of the Games, according to an internal memo seen by Nikkei Asia. Beijing Automotive Group, which has joint ventures with Daimler of Germany and other global automakers, also had discussions with suppliers over potential disruptions to parts procurement during the Winter Olympics, Nikkei has learned.
In the memo, Toyota told suppliers that in the worst-case scenario, manufacturing and logistics would both be halted for the duration of the Winter Olympics and Paralympics. The Japanese carmaker told its partners the situation may change, depending on government announcements, asking them to be prepared for potential disruptions.
Daimler said that, as a matter of principle, the company does not comment on its relations with suppliers. BAIC did not answer Nikkei Asia’s question as to whether it has discussed with suppliers possible supply chain disruptions during the Games but said it will fully support the Winter Olympics and Paralympics. Toyota China declined to comment.
China is expected to restrain its emissions-heavy industrial activity — including production of steel, cement, chemicals and coal-fired electricity — in as many as eight northern provinces from January through mid-March, according to government documents and manufacturers. Affected provinces include Tianjin, Hebei, Shanxi, Shandong and Henan.
The deputy secretary-general of the China Association of Automobile Manufacturers, Chen Shihua, on Tuesday told a public summit that local governments in northern China will impose 39 days of industrial production restrictions from Jan. 28 to March 9 due to the Winter Olympics. This, he said, will have a certain impact on the production and demand for the automobile industry.
“We have started discussions on how to respond to the likely production restrictions early next year so that we can reduce the potential impact on the supply chain,” an executive at a machinery manufacturer that supplies a range of carmakers told Nikkei Asia. “We had that experience back in 2008, when Beijing hosted the Olympics for the first time. China really takes having a clear sky for such an important international event very seriously.”
An executive from a leading electronics component maker also said the company has begun preparing for restrictions early next year and is making plans, similar to Toyota’s, to diversify production to other areas and to secure more parts ahead of the Chinese New Year.
“This year, most of the companies are aware that there are a few important events happening around the same time, from the end of February to mid-March, including the Winter Olympics and the China’s National People’s Congress … so we will prepare earlier,” the executive said.
Beijing has vowed that the quadrennial sporting event will be the most environmentally friendly ever and the first “zero-carbon” Olympics in history. President Xi Jinping has made putting on a “green Olympics” a top priority.
China’s State Council, the country’s top decision-making body, said in November that it will strictly regulate pollution in and around Beijing, Tianjin and Hebei provinces, and elsewhere this winter, to “assure and protect a blue sky.”
Carmakers are on high alert for environmental policies that might affect their supply chains. The industry is already struggling with a yearlong global chip shortage as well asunexpected power cutsin several provinces in September and October.
The central government has notified steelmakers to reduce production by 30% compared with last year between Jan. 1 and the middle of March, while the Tangshan municipal government in Hebei Province has demanded that steel, cement and coal-fired electricity suppliers initiate staggered production and lower emissions of pollutants by more than 40% from the same time this year, according to official announcements.
The Tangshan city government rolled out comprehensive measures ahead of the Winter Olympics as early as August, with emissions from local restaurants and outdoor barbecues among those in line for restrictions.
Kensaku Ihara in Tokyo contributed to this report.