2020 all over again: COVID lockdowns disrupts global supply chain

2020 called; they want their headline back. Shanghai, one of China’s major financial centers, has been under complete lockdown since April 1 (2022, for emphasis).

Lockdowns are at risk of disrupting manufacturing in various industries.

What’s the big deal? While many major countries have already lifted lockdown restrictions, China has stuck to its zero-COVID policies.

Shanghai is China’s largest city and onshore financial hub, per FT — and will impact global trading partners.

• This outbreak is China’s worst since the pandemic started, and 25M+ citizens are under a strict lockdown.
• “Shanghai is economically important for both China’s domestic economy and trade with the rest of the world,” according to Citigroup’s Head Asia Economist (FT).

Driving off a cliff: The once hot Chinese electric vehicle maker Nio (NYSE:NIO) is down 70% since the start of 2021, and the upstart may have further room to fall.

• Over the weekend, Nio suspended operations — warning customers of shipment delays.
• Nio also raised prices, one of the last major China EV manufacturers to increase costs.

$NIO fell 1.5% on the news, but it wasn’t only Chinese domestic manufacturers impacted. Notice of its delays also affected global carmakers with factories in the region (i.e., Volkswagen and Tesla):

• Tesla (NASDAQ:TSLA) — who made 26% of its sales from China — fell 4.8% as its Shanghai gigafactory remained shut down.
• Tesla’s factory produces cars for domestic sales and global imports (i.e., Europe).

Delivery at any cost: Wait times on semiconductors have risen. Still, certain companies, including Taiwan Semiconductors (NYSE:TSMC), have resorted to “closed loop systems” — where workers live on site.