Mazda seeks to reduce dependence on Chinese supplies after COVID lockdowns

© Reuters. FILE PHOTO: A Mazda logo is displayed at the 89th Geneva International Motor Show in Geneva, Switzerland March 5, 2019. REUTERS/Pierre Albouy

TOKYO (Reuters) - Japan's Mazda Motor (OTC:MZDAY) Corp said on Friday it would ask its parts suppliers to increase stockpiles in Japan and produce components outside China after COVID-19 lockdowns in Shanghai destabilised supply and hampered production.

The request from the Hiroshima-based automaker underscores the vulnerability of sprawling supply chains that have been tested by the pandemic and geopolitical tensions, casting uncertainty over businesses.

The Japanese automaker reported on Tuesday an operating loss of 19.5 billion yen ($144.4 million) for the first quarter of its financial year, due to disruptions resulting from the stringent COVID-19 counter-measures in China.

Mazda said it brought chips and crucial auto parts to China to be assembled, but was unable to receive those parts from Shanghai during the city's lockdown.

Even if Mazda's direct suppliers were Japanese and European companies, they still had parts coming through China, said Takeshi Mukai, the automaker's senior managing executive officer.

"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," Mukai said. "Given the current (zero-COVID) policy, the key point is to keep (parts) in our hands."

Mazda will seek to include higher domestic inventories and diversification of production outside China when forming contracts with suppliers for designing new models in the long term, he said.

The automaker will also seek to simplify its procurement structure as a way to reduce the frequency of distribution between bases, he said.

"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 globalisation as we were in the past," said Mazda senior managing executive officer Masahiro Moro.

($1 = 135.0500 yen)