According to an April 19 article by Bloomberg, the European Chamber of Commerce warned of the potential shutdown of factories operating in closed-loop systems. This projected consequence is due to parts shortages or logistics problems.

Maximillian Butek, chief representative at the Delegation of German Industry & Commerce in Shanghai, said in a LinkedIn post on April 18 that companies under closed-loop production “are facing challenges and may shut down very soon due to lack of logistics and workers.”

He added, “Their workers for closed-loop production have been working for more than three weeks and need to be replaced.”

Under China’s severe zero-Covid strategy, many companies have adopted closed-loop management, such as Tesla and Volkswagen Shanghai.

However, as Butek said, most of his associations’ members experienced serious suspension of factories, material supply, and product delivery under Shanghai’s idle logistics.

Bloomberg reported that Tesla only has enough 2-week inventory under its new closed-loop schedule, whereas Volkswagen AG’s Shanghai factory lacks auto parts supply to produce cars.

Butek said supply and logistical challenges have spread throughout the Yangtze River Delta region, not Shanghai alone. Companies in the region bear city-specific regulations and difficult local logistics navigation.

Butek said, “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 added, “Customers might turn to other sources in China if the situation doesn’t change soon.”

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