Electricity rationing in Sichuan province – China’s most important hydroelectric center – has affected production by Shanghai’s major automakers, including You’re here (TSLA)according to reports in Chinese state media.
Sichuan has ordered most factories to close for six days until Saturday due to extreme heat and the drought that caused an electricity crisis. The closure has since been extended for another five days.
SAIC Motor – China’s largest automaker – and Tesla have informed the Shanghai city government that the energy crisis in Sichuan has disrupted supply chains and impacted production at their factories in the city, according to reports.
Shanghai, located about 1,200 miles from Sichuan province, is home to Tesla’s “Gigafactory,” which has already built one million cars for the American electric vehicle company.
SAIC has three major factories in Shanghai, including two joint ventures with volkswagen (VLKAF) and General Engines (GM).
Last week, companies asked the Shanghai government to help their suppliers in Sichuan, which have been hit by electricity rationing.
According to official documents cited by Chinese state media, 16 auto suppliers in the region were unable to manufacture enough parts last week due to power cuts. The Shanghai Economic Planning Agency asked Sichuan to increase the power supply of these enterprises, including Chengdu Yinli Auto Parts.
“SAIC and Tesla are Shanghai’s leading enterprises in building a world-class automotive industry center, and have established important supply partnerships with many auto parts enterprises in Sichuan Province,” the official said. Shanghai government to Sichuan authorities, according to documents cited by Caixin. .
CNN Business has reached out to the Shanghai government and the two automakers for comment, but has not yet received a response.
China is facing its worst heat wave since 1961, with temperatures exceeding 40 degrees Celsius (104 degrees Fahrenheit) in more than 200 cities. Weather conditions have caused the Yangtze River, a crucial river in the country, to shrink and cause drought in more than 70 cities.
Extreme heat and drought have caused a spike in demand for air conditioning and a drop in hydroelectric power supply, straining the power grid.
Sichuan, which is a hub for makers of semiconductors, lithium batteries and auto parts, shut down most factories in the province last Monday. The local government said the move was to ensure enough electricity for residents.
The province extended the power outage for another five days on Saturday as high temperatures persisted around 40 degrees Celsius, while light rainfall persisted. Electricity rationing has already impacted large international companies.
Japanese car manufacturer Toyota (MT), which has a factory in the city of Chengdu, suspended operations last week, according to Reuters. The company did not immediately respond to a request for comment.
Apple (AAPL) Supplier Foxconn’s factory in Sichuan was also hit, although the company said the impact was “not significant”. BOE Technology, a major LCD and OLED panel maker, also said last week it had to make “production adjustments” in Sichuan in response to the power cuts.
Shanghai’s request special treatment for its manufacturers sparked a backlash on Chinese social media, with many netizens describing it as “inappropriate” and “shameless” at a time when tens of thousands of people in Sichuan are without power.
Chinese automakers, including Tesla, had only just begun to recover from a months-long lockdown in Shanghai earlier this year that hit its production and suppliers. Car sales fell sharply in April, with Tesla sales dropping 98% that month.
— CNN’s Beijing bureau contributed to this report.