Mazda Motor Corporation is looking to have parts produced outside of China after the country’s stringent pandemic policy severely affected its operating profits.

According to Reuters, on August 9th, the Japanese car brand reported an almost $3 billion operating loss during the first quarter of the financial year. Production was particularly affected by China’s devastating lockdown in its economic hub of Shanghai.

During the period, Mazda says the strict measures obstructed it from accessing the chips and other essential car components it had shipped to China for assembly. Its direct suppliers from Japan and Europe also have had parts flowing through China. 

Senior managing executive officer of Mazda, Takeshi Mukai, says, “In our case, we were the first to be affected by the lockdown, as we had been promoting the procurement of parts via China for a while. Given the current (Zero-Covid) policy, the key point is to keep (parts) in our hands.”

In light of uncertainties stemming from China’s pandemic approach, Mazda plans to find local inventories and various manufacturing options outside the country for future models. The company will also try to streamline its procurement system to lessen distribution frequency across locations. 

Mazda senior managing executive officer Masahiro Moro says, “As we continue to do business globally, we must manage the current changes based on the recognition that we are no longer in the era of globalization as we were in the past.” 

There are worries that global supply chains may still be vulnerable due to rising geopolitical tensions in the Taiwan Strait.

Nitin Chopra, an expert at Allianz Global Corporate & Specialty, told a Canadian Underwriter, “A potential conflict between China and Taiwan could prove catastrophic for the supply of semiconductors.” It could “cripple the auto industry, which has already seen substantial delays in manufacturing due to a shortage of chips. Manufacturers of computers and cell phones will have to face an acute shortage of key components.”

According to CarScoops, Mazda rebounded fast after the shock of the Shanghai lockdown, with senior managing executive officer Moro saying that “the quality of sales and unit sales have improved.”

Even so, Chopra noted that China has not entirely stopped its pandemic curbs in the country despite lockdown easing.

He continues, “And that was having a rough impact on supply chains and manufacturers and companies looking to produce goods [with components] from China. They have to go and look for new vendors in some cases.”

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