Chip shortages lower auto sales

May figure down 3% year-on-year to 2.13m vehicles, the first decline since April 2020

Vehicle sales in China fell for the first time in 14 months in May as manufacturers delivered fewer vehicles to the market due to global semiconductor shortages, according to industry data.

Last month, 2.13 million vehicles were sold in the world's largest vehicle market, down 3.1 percent on a yearly basis, the China Association of Automobile Manufacturers said. It was the first decline in China since April 2020, when the country's vehicle market started to rebound from the COVID-19 pandemic.

The CAAM also said it was cautiously optimistic on the performance of the sector in the remaining months.

Shi Jianhua, deputy secretary-general of the association, said global chip shortages have been hurting the industry since late last year. "The impact on production is continuing, and the sales figures in June will be affected as well," he said.

Electric car startup Nio delivered 6,711 vehicles in May, up 95.3 percent from the same month last year. The carmaker said its deliveries would have been higher if not for the chip shortages and logistical adjustments.

SAIC Volkswagen, one of the country's leading carmakers, has already cut output at some of its plants, especially production of high-end models that require more chips, according to Shanghai Securities Daily.

The China Auto Dealers Association, another industry association, said inventories are declining steadily at many automobile dealers and some models are in short supply.

Jiemian, a Shanghai-based news portal, said SAIC GM's production in May fell 37.43 percent to 81,196 vehicles primarily due to chip shortages.

However, Shi said the shortages will start easing in the third quarter and the overall situation will turn for the better in the fourth quarter.

Chipmakers and auto suppliers are already working around the clock to solve the problem, while authorities are improving coordination among companies in the industrial chain for better efficiency.

The Ministry of Industry and Information Technology, the nation's top industry regulator, has asked local automobile makers and semiconductor companies to compile a brochure to better match their supply and demand of auto chips.

The ministry is also encouraging insurance companies to roll out insurance services that can boost local automakers' confidence in using indigenously-produced chips, so as to help ease chip shortages. On Friday, four Chinese chip design companies inked agreements with three local insurance companies to pilot such insurance services.

Earlier this month German auto parts supplier Bosch opened a $1.2 billion chip plant in Dresden, Germany, saying that its automotive chips are expected to roll out in September this year.

Despite the sales fall in May, the CAAM said it is optimistic about the market's whole year performance because of China's economic resilience and soaring sales of new energy cars.

Shi said the association is considering raising the estimate for this year's sales growth to 6.5 percent from 4 percent, which was made at the start of the year.

"Overall vehicle sales this year are likely to reach 27 million units, while sales of new energy vehicles may touch 2 million units, up from our previous estimate of 1.8 million," said Shi.

Statistics from the association show that 10.88 million vehicles were sold in China in the first five months, up 36 percent year-on-year.

Sales of electric cars and plug-in hybrids reached 217,000 units in May, up 160 percent on a yearly basis, bringing the total from January to May to 950,000 units, over three times the figure a year ago.

The China Passenger Car Association was even more optimistic about the full-year performance and hiked its new energy vehicle sales target to 2.4 million units this year.

Cui Dongshu, secretary-general of the CPCA, said his confidence came from such vehicles' growing popularity in the country and their increased exports to overseas markets.

Nio said it will accelerate efforts in June to make up for the loss caused last month. The startup said it will maintain the delivery target of 21,000 units to 22,000 units in the second quarter of this year. Its models will be available in Norway in September. Tesla sold 33,463 China-made vehicles in May, of which a third were exported. Cui estimated that Tesla's exports from China would hit 100,000 units this year.