Chinese smart electric vehicle (EV) start-up Nio, whose manufacturing was recently disrupted by supply-chain constraints for the fifth time this year, is making contingency plans to avoid further stoppages amid a potential flare-up in coronavirus cases as China shifts from zero-Covid to living with the virus.
Nio will increase the inventory of key components, closely monitor workers’ health and adjust its workforce to maintain smooth operations of its assembly line in Hefei, eastern Anhui province, president Qin Lihong said in an online briefing on Monday.
“Workers testing positive will be required to withdraw from the production facilities,” he said. “That will lead to a shrinking labour force, but we need to keep our workers healthy and comfortable.”
He was confident that Nio would utilise 80 to 90 per cent of its capacity in the coming months.
Nio president Qin Lihong said the carmaker has put contingency plans in place to avoid disruption to its production. Photo: Handout
Last Wednesday, China’s cabinet published a 10-point guideline pledging to relax pandemic curbs, such as dropping mass testing, health codes and centralised quarantine requirements for most cases.
The easing of the virus-prevention measures paves the way for the world’s second-biggest economy to exit its three-year zero-Covid strategy, under which mass lockdowns and harsh standstill orders severely disrupted manufacturing and commercial activities.
But the relaxation of virus control measures could lead to a resurgence in Covid-19 cases across the mainland over the coming months given the highly transmissible nature of the Omicron variant.
Some small business owners in Shanghai fear a severe outbreak could force grocery stores, restaurants and barber shops to close down, having already suffered huge losses this year.
“A soaring number of cases across the country could be a stern test for many small firms because they may have already run out of cash,” said Wang Feng, chairman of Shanghai-based financial services group Ye Lang Capital. “For smart EV bellwether Nio, it also has to keep operations and sales at a normal level after production was disrupted so many times [this year].”
A two-month citywide lockdown in April and May has delivered a big blow to the bottom line of 2.67 million businesses registered in China’s commercial hub, including Nio.
In October, Nio’s factory – the JAC-Nio Advanced Manufacturing Centre in Hefei, ran short of components for the ET5 sedan as the country’s zero-Covid policy forced some suppliers to suspend operations. It was the fifth time since March Nio was forced to pause manufacturing.
Nio said it resolved the problem last month. The carmaker delivered 14,178 units in November, an increase of 41 per cent month on month, after restoring its supply-chain system.
The restoration of normality to manufacturing operations has cut the waiting time for cars. According to its official app, buyers of the ET5 saloon can receive their cars in 13 to 15 weeks after placing orders. In September, the delivery time was up to 23 weeks. The waiting period for the ET7 has also been cut from five weeks to two.
Qin said China’s exit from zero-Covid augured well for the automotive supply chain in the long term.
He said Nio would launch two new models during the Nio Day event later this month.