China Auto Sales Drop as Chip Shortage Endures

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The world’s major auto markets are grappling with a historic chip crisis and China hasn’t been spared either

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The world’s major auto markets are grappling with historic chip shortages and China has not been spared either. The decrease intensified in the third quarter as COVID-19 cases rose in Southeast Asia – including Malaysia, where semiconductors are shipped for testing and packaging.

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In recent months, auto factories in the US and Japan have halted production due to semiconductor shortages. According to Wards Intelligence, September auto sales in the US are down 25%.

Cui Dongshu, general secretary of the Passenger Car Association, said tighter monetary policy in China, a weak real estate market and declining earnings in the manufacturing sector have hurt consumer confidence.

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Chen Shihua, deputy general secretary of the government-backed China Association of Automobile Manufacturers, said power cuts in various Chinese regions, which limited production in September, are increasing the risk in auto production.

Last month, the China Automobile Dealers Association said the worst-case scenario regarding semiconductor shortages domestically was over and it expected to ease supply issues. However, the dealers’ association said it may take at least three months to feel the impact on the retail market.

In September, sales of global auto makers in China were badly hit. Toyota Motor Corporation

The company said sales in the country fell 35.9% to 115,000 vehicles from a year ago due to shortages in semiconductors and other components due to a rise in COVID-19 infections in Southeast Asia. Toyota recently halted some of its production lines in China, a spokesperson said.

honda motor Co.

said its China sales fell 28.1%, while Nissan Motor Co.

said its sales declined 26.2%. Volkswagen’s sale of two China joint ventures AG

Data from the Passenger Car Association showed that there was a decline of 48.6% and 23.1%, respectively.

“Inventory levels are at an all-time low,” said Guan Bolang, a Toyota dealer in Guangzhou. Due to production disruptions, some models may take months to be delivered, during which time consumers can cancel orders, he added. Meanwhile, as stock of vehicles was low, Mr. Guan was hesitant to offer discounts for fear of losing further profits.

General Motors Co.

The quarterly report delivered 623,000 vehicles in China in the July-September quarter, down about 19% from a year ago, due to disruptions in the semiconductor supply chain, the company said.

Paul Gong, China Auto Analyst at UBS, said that since Chinese consumer demand is generally strong in the fourth quarter, the impact of supply chain disruptions on sales could be exacerbated.

In addition to semiconductor shortages, car manufacturers and component producers also face increased prices for materials including cobalt, lithium, steel and aluminum, according to China’s auto industry regulator, auto manufacturers and suppliers. Cobalt and lithium are essential for making most electric-vehicle batteries.

Rising raw material costs coincide with rising Chinese demand for electric vehicles. In September, sales of 334,000 vehicles, known as new-energy vehicles – mostly electric vehicles – in China more than tripled from a year earlier, the passenger car association said.

Tesla Inc.

56,006 Made-in-China vehicles were sold in September, of which 6.9% were exported to other markets, data from the Passenger Car Association showed. Under pressure from rising material costs, Tesla said, it raised the price of its Shanghai-made Model Y Display by 2.6% last month. Model Y buyers who ordered in October will have to wait until next year to receive their cars, said a salesman at a Tesla store in Beijing.

Chinese EV makers posted record sales last month. BYD Co.

71,099 new-energy vehicles and NIO . sold of Inc.

and XPeng Inc.

The companies said each delivered more than 10,000 vehicles.

Yoko Kubota [email protected] . Feather

.

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