Toyota has suspended operations at a factory in China because local authorities issued an order for the region to conserve electricity. Sichuan province is reportedly rationing energy for both residential and industrial zones, complicating things for manufacturers. Toyota has said that the plant is likely to be closed through Saturday — adding that it would be monitoring the situation and taking guidance from the Chinese government. But the issue could have sweeping ramifications because the area is also home to numerous part suppliers.
While Sichuan managed to avoid the nationwide energy rationing witnessed in 2021, attributed to a lack of coal, state-run Chinese media has reported the province has been impacted by record temperatures and severe drought. According to China’s Ministry of Water Resources, water levels of the Yangtze River are at historic lows. Though northern regions of the country, including the nearby Pengzhou, endured flash flooding over the weekend — and the country saw numerous dams bursting after sustained rains earlier in the year. All of the above has allegedly done a real number to the nation’s ability to produce hydroelectric power.
Needless to say, there are parts of the country that are in a bad way and local officials have become concerned about how citizens will respond. According to the South China Morning Post, the government’s planned electricity cuts will only last a few hours and focus on industrial areas so that residential power is maintained. However several cities in the area (e.g. Dazhou) have already announced rolling blackouts for a couple of days.
Considering Toyota thinks it might not have reliable access to electricity until the weekend, something tells us the issue might be bigger than presented by the state-run press. According to Reuters, the province is expecting producers of lithium, fertilizer, and various metals used in construction to temporarily shut down or curb their output if they manage to stay open. Market analysts are already speculating that this could further spur the prices of EVs, and automobiles in general, as the value of the relevant (and seriously in-demand) commodities continues to climb.
Toyota’s factory in Sichuan builds the Coaster and Land Cruiser Prado intended for the Asian market. So it’s unlikely there will be any production issues that’ll reach North America. But the area likewise encompasses factories producing all manner of auto parts (e.g. tires, gaskets, belts, control arms, bearings, electronics, shock absorbers) intended for export.
Keeping tabs on how much downtime the Toyota plant actually sees in the coming days may be indicative of the general state of the region’s manufacturing capabilities. Unfortunately, Toyota said it didn’t know how much the shutdown would diminish output. Meanwhile, the Department of Economy and Information Technology of Sichuan notified industrial-based electricity users in 19 out of 21 major cities located in the province to suspend production from August 15th through the 20th.
“We’re monitoring the situation every day and following the guidance from the government,” a Toyota spokesperson said.
[Image: Andrii Medvediuk/Shutterstock]
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