Car factories near Beijing to halt production for Olympics

The big automakers, including Daimler and Toyota, are bracing for supply chain disruptions ahead of the Winter Olympics next year, one that Beijing has pledged will be carbon neutral.

Toyota, the world’s biggest automaker, will move some production of components out of Beijing. It also told suppliers in China to have more than one month of inventory in stock ahead of the Games.

• In the worst-case scenario, the Japanese automaker will halt manufacturing and logistics during the duration of the Games.
• 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.

Back in November, China’s State Council said it will strictly regulate pollution in and around Beijing and elsewhere. To achieve this, China will restrain emission-heavy industries like steel, cement, and coal-fired electricity.

• On Tuesday, it was announced that local governments in northern China will impose 39 days of industrial production restrictions during the Winter Olympics.
• An executive at a leading electronics component maker told Nikkei Asia that the company had prepared for production restrictions early next year and had already made contingency plans.
• “We had that experience [of production restrictions] back in 2008, when Beijing hosted the Olympics for the first time,” another executive at a machinery manufacturer said.

The takeaway: After a year of chip shortages, pandemic complications, and unexpected power cuts, carmakers are on high alert for all kinds of supply chain disruptions. One source of turbulence in the coming years will likely be Beijing’s environmental policies as the country makes good on its various carbon neutrality pledges.