Chip shortage restricts China’s car production, leaving showrooms empty, but local brands are faring better
- Car output fell 6.8 per cent in May to 2 million vehicles, but local brands with lower sales have better weathered the semiconductor shortage
- Wait times for certain car models have jumped from weeks to months
The lack of semiconductors, which have become vital for increasingly smart cars, is affecting car plants around the world, forcing carmakers to halt production. The effect can be seen at car dealerships in China, where the push to adopt electric and hybrid cars, which China calls new energy vehicles (NEVs), has been upended by the chip shortage.
“Other exhibition cars were all picked and sold,” said the shop’s dealer surnamed Yu. “You are not going to get any Benz cars delivered in Beijing soon … the company has cut sales because of the chip shortage.”
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When all the necessary parts are available, the all-electric SUV can be assembled in Beijing and delivered within 10 days, Yu said, but now it takes at least two months.
Car output in China dropped 6.8 per cent in May to 2.04 million vehicles compared with the same month last year, and sales fell 3.1 per cent to 2.12 million units, according to data from China’s Ministry of Industry and Information Technology (MIIT).
China’s own car brands have been less affected by the chip crunch, at least for now. The dealer at a showroom for Marvel R, an electric car brand under state-owned SAIC Motor, said the new SUV line has seen a limited impact from the chip shortage because “their sales are not big”. Marvel R buyers can expect to see their new car show up within two weeks, she said.
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NEV output in China surged 150 per cent in May over last year to 217,000 units, and sales expanded 160 per cent in May, with the sales volume nearly matching output for the month, according to China’s industry ministry.
The chip shortage, which started to emerge in the second half of last year, is projected to cost carmakers 3.8 million units in lost production, or about 5 per cent of estimated annual sales for 2021, according to Fitch Ratings. In response, companies are prioritising their most lucrative models to meet strong demand.
The chip shortage is widespread in the auto industry now, and the bestselling models made in China could be delivered within a month, according to an industry insider at one of the country’s largest car manufacturers who spoke on the condition of anonymity. He said the suppliers and equipment manufacturers are all suffering from the disruption.
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Meanwhile, China’s integrated circuit (IC) output surged 37.6 per cent from a year ago to 29.9 billion units, according to the National Bureau of Statistics. IC imports also rose 30 per cent in the first five months of the year compared with the same period in 2020, reaching 260.35 billion units, or nearly double China’s domestic output in the same period.
Unlike the more advanced process nodes used for making chips in the latest smartphones and computers, cars can generally get by using a 28-nanometre node process or larger, which are not subject to trade sanctions from the US.