SHANGHAI – When the tight supply of semiconductors started to dent auto production in China late last year, it was generally seen as a temporary problem.
Now nearly six months into 2021, the threat posed by chronic chip shortages to the Chinese auto industry looms large.
In December, Volkswagen Group became the first automaker to acknowledge the impact of the chip shortage on output in China.
Three other automakers have sounded similar alarms.
Volvo Car Corp. in March said it would temporarily suspend or adjust production in China as well as in the U.S. due to insufficient supplies.
The same month, Nio, a leading Chinese EV startup, was forced to suspend output for five days.
And last month, Great Wall Motor Co., the largest domestic Chinese light truck maker, admitted production at two of its major plants in China has been affected by tight chip stockpiles.
More auto manufacturers are believed to have difficulty in securing sufficient supplies of chips, though they haven’t openly acknowledged it.
General Motors is one of them. In April, production at SAIC-GM, the Detroit automaker’s joint venture with SAIC Motor Corp., slipped 29 percent to 75,711 from a year earlier, after first-quarter production surged 129 percent to 341,679 and sales jumped 87 percent to 335,773, according to SAIC.
The main culprit for the latest slump in output at SAIC-GM, which builds and markets Cadillac, Buick and Chevrolet cars and light trucks, is the chip shortage, according to analysts at IHS Markit and LMC Automotive.
Suppliers
The chronic chip shortage has not only rattled China’s auto manufacturers, but also suppliers that operate in the country.
As local auto production continued to rebound after the pandemic, China revenue at Aptiv, a global supplier of autonomous driving technologies and automated driver-assist systems, surged 94 percent in the first quarter.
“Chip supply is something I need to check up with my team several times a day,” Simon Yang, Aptiv’s president for Asia Pacific, said last month at the Shanghai auto show, where the company displayed a scalable design for smart vehicle architecture and its latest ADAS platform.
Valeo, the French supplier of sensors, thermal management systems, lighting and automated driving systems, recorded a 76 percent increase in sales to automakers in China in the first quarter.
At the Shanghai show, Francois Marion, Valeo’s China president, said a big part of his job these days is closely coordinating with the company’s global business units to meet chip demand for China.
At Bosch, a leading supplier of chips and many other types of components, Xu Daquan, the company’s executive vice president for China, said at the Shanghai auto show last month that the one thing that keeps him busy these days is ensuring Bosch’s chips are fairly distributed to each of its local customers.
Prepare for the worst
With the chip shortage spreading to more automakers, the China Association of Automobile Manufacturers this week adjusted its assessment of the situation.
The trade group on March 11 forecast the shortfall would start to ease in the second quarter after dragging down vehicle production in China by 5 percent to 10 percent in the first quarter.
This week it predicted the chip shortage is likely to worsen in the second quarter.
Since the microchip shortfall has become global in scale and China’s auto industry faces a huge supply gap, especially those used in infotainment systems, it is hard to determine when supplies can be replenished, Chen Shihua, CAAM’s deputy secretary-general, said at a press conference Wednesday.
The best guess CAAM can make is that the chip shortage “will be somewhat eased in the fourth quarter of this year,” he added, ”and is likely to be largely eased in the first quarter of next year.”