Covid lockdowns are causing chaos in the world's biggest car market

Hong Kong(CNN Business) Factories shut down, new model launches delayed and sales plunging. China's huge car market has been thrown into disarray by the country's latest Covid surge, with stringent lockdowns across several cities hitting vehicle production.

China's worst Covid outbreak in two years has prompted authorities to ramp up the country's zero-Covid policy, locking down several major cities and tens of millions of people.

The strict lockdown measures in places such as Shanghai and Jilin province have forced automakers to shut down manufacturing and risk delayed shipments at a time when global demand for vehicles is strong.

Volkswagen's (VLKPF) factories in Shanghai and Changchun, the provincial capital of Jilin, have been shut for weeks, the company said on Monday.

"Due to the current Covid situation, production in our factories in Changchun (since mid-March) and Anting/Shanghai (since April 1) is currently on hold," Volkswagen said in a written response to CNN Business. "This is currently causing a delay in production."

The company added that it will compensate for the production stoppages "if the situation eases in the near future," through extra shifts and other measures. "At present, we are assessing the situation from day to day," it added.

Toyota (TM) has also closed its factory in Changchun for nearly a month.

"Due to the travel restrictions in Changchun, the impact on supplier operations, and the perspective of ensuring the safety and security of employees and all related parties, Toyota has been suspending operations at the Changchun plant from March 14 onwards," a company spokesperson told CNN Business.

Tesla (TSLA) has halted production at its Shanghai factory since the city imposed a lockdown on March 28, according to Reuters. The company didn't respond to a request from CNN Business for comment.

Nio (NIO), a Chinese electric vehicle maker, said Saturday that it had suspended production because of Covid-related disruptions.

"Since March, due to the pandemic, the company's supplier partners in several places including Jilin, Shanghai and Jiangsu suspended production one after the other and have yet to recover," the company said in a statement. "Consequently, Nio has halted car production," it said, adding that the company will postpone deliveries of its EVs to users.

It's not just individual manufacturers. The Beijing auto show, one of the industry's largest global gatherings, has been postponed until further notice due to the recent surge in Covid cases. The event was originally scheduled to be held from April 21 to April 30.

"We will pay close attention to the development of the pandemic," Secretariat of Auto China said in a post on its official WeChat account on Saturday, adding that it will announce new dates in due course.

That means several new car launches will be delayed. Chinese EV makers Nio, XPeng, and Li Auto have previously said they would unveil new models at the Beijing autoshow.

The Covid restrictions have also taken a toll on the country's car sales.

Auto sales in China plunged 12% in March from a year ago, reversing a 19% increase in February and ending two straight months of growth, data from the China Association of Automobile Manufacturers showed on Monday.

The association attributed the decline to the recent surge in Covid cases.

Monday's data showed one bright spot, however — China's demand for electric vehicles remains strong.

About 455,000 new energy vehicles, including hybrids and pure EVs, were sold in March, up 122% from a year ago, according to separate data from the China Passenger Car Association.

Tesla's China sales were particularly strong, ranking first among pure-electric brands.

The company delivered 65,814 China-made vehicles in March, with the majority of those sold in the Chinese market. That number was up 85% from a year ago.

BYD (BYDDF), meanwhile, sold the most new energy vehicles in China, delivering 104,878 units in March. Among them, 53,664 were pure-electric models.

Tesla didn't immediately respond to a request for comment about its March sales numbers.