SHANGHAI (BLOOMBERG) - Even those companies in China whose factories are operating under so-called closed-loop systems may be forced to stop work due to parts shortages or logistical challenges that make moving people and goods around the country near impossible, a European chamber of commerce has warned.
"A few companies are running in closed-loop production now. Those companies are facing challenges and may shut down very soon due to lack of logistics and workers," Mr Maximilian Butek, chief representative at the Delegation of German Industry & Commerce in Shanghai said in a LinkedIn post on Monday (April 18).
"Their workers for closed-loop production have been working for more than three weeks and need to be replaced."
Mr Butek added that most of his association's members can't "have production sites running since they cannot get raw materials delivered and cannot deliver their products to their customers. The logistics in Shanghai is not working".
Officials in China's financial hub have been encouraging companies to restart output that was halted due to the city's strict Covid-19 lockdowns by using closed-loop systems in which workers live on site at their factories.
While some, like Tesla and Quanta Computer, which makes laptops for Apple, have restarted operations, the experience hasn't been all smooth.
Tesla only has inventory for just over two weeks based on its new closed-loop schedule, a person familiar with the matter said, while workers locked in Volkswagen AG's Shanghai factory don't have sufficient supply of the auto parts needed to make cars.
The supply and logistics problems aren't contained to Shanghai. Mr Butek said the delegation's companies in the Yangtze River Delta had found logistics aren't working there either "since different cities have different rules".
"For technical staff, which need to execute quality assessments or maintenance of machines in other parts of China, it is almost impossible to commute or travel," he said. "Customers might turn to other sources in China if the situation doesn't change soon."
