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China’s heatwave closes factories that supply parts to Tesla, Intel, and Toyota

China’s heatwave closes factories that supply parts to Tesla, Intel, and Toyota

The world’s biggest electric vehicle battery maker, Contemporary Amperex Technology Co. Limited (CATL), and Intel are among the major companies shutting down their factories for six days in China’s Sichuan province because of a heatwave-related power shortage in the area, according to CNN and Bloomberg.

The move affects factories belonging to companies like Tesla’s battery supplier CATL, Apple’s supplier Foxconn Technology, Toyota, Texas Instruments, Volkswagen, Onsemi, and more.

China ordered all Sichuan factories to pause operations until August 20th to alleviate the pressure placed on the power grid after China’s worst heatwave in 60 years resulted in increased air conditioning usage. According to CNN, temperatures spiked to 104 degrees Fahrenheit in several cities (40 degrees Celsius).

Authorities say they’re trying to conserve power for residences in the region as officials warned Sichuan is facing the “most severe and extreme moment” in power supply, Chinese state news outlet Sichuan Daily reports. That’s likely because the region is reliant on hydropower, making it particularly vulnerable to the heatwave and drought that’s also drying up hydro dam reservoirs.

As noted by CNN, Sichuan is an important area for semiconductor and solar panel industries. Manufacturers flock to the mineral resource rich region for raw materials used in the solar photovoltaic and electronics industries, like polysilicon — a key solar panel ingredient. The province is also a critical mining hub for lithium, which is used to produce electric car and smartphone batteries.

Some analysts believe the temporary shutdown could increase the price of both polysilicon and lithium as supply goes down. As of August 17th, just two days after the shutdown, industry officials confirmed to Bloomberg the price of polysilicon had indeed gone up.

However, some companies don’t anticipate too much disruption. According to Bloomberg, Foxconn — which makes Apple’s iPads in the region — said the drought hasn’t impacted them much yet. Volkswagen, meanwhile, reportedly remarked on Monday it wasn’t expecting long delivery delays.

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