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China's heat wave leads to manufacturing meltdown

Megan Hernbroth
Aug 23, 2022
Illustration of the Wall Street bull melting.  
Illustration: Aïda Amer/Axios

A more than two-month heat wave in southern China is shuttering manufacturing plants or limiting production for companies like Apple, Tesla and Toyota.

Why it matters: After two years of pandemic-related disruptions, global supply chains now have to contend with extreme weather events caused by or made worse by climate change. That, in turn, is impacting everything from production to financing across the clean-tech space.

The latest: Factories in Sichuan, a key industrial hub, are closed due to lack of power during the unprecedented heat wave and an emergency measure extended on Aug. 21.

  • Some of China's hydropower has gone offline as lakes and rivers dried up.
  • Apple, Tesla, Toyota, Foxconn and Volkswagen are among the companies with factories affected by the closure measures.
  • Tesla has asked the Shanghai government for reassurance that its suppliers there would be spared from emergency electricity measures, saying 16 current plants are unable to operate at full capacity due to restrictions.

Zoom out: This isn't the only weather-related supply chain disruption going on, and it won't be the last.

  • Drought in Europe has forced companies to curtail shipments.
  • California's Central Valley, the largest food provider in the U.S., is reducing output on nearly 600,000 acres of farmland due to ongoing water shortages and droughts in the region.

The bottom line: Studies have long predicted extreme heat events across multiple continents, but factory closures and shipping route impacts have finally forced global markets to pay attention to and plan for long-term disruptions.

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