China auto industry's chip supply disruption risk to melt away, association says

The risk of chip supply disruptions in China's automotive industry will gradually resolve due to the newly released capacity within China and the gradual recovery of capacity from previous production disruptions, said a report released Tuesday by the China Passenger Car Association (CPCA).

The CPCA believes that the shortage of production of passenger cars due to chip shortages does not amount to direct losses.

Current auto prices in the retail market are relatively stable, with no obvious trend of price increases for the main models, the report said, adding that this reflects the strong ability of manufacturers and dealers to respond to the crisis with their inventories.

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Due to the high profitability of mainstream automotive chips and high requirements for adaptability, reliability, durability, and compliance, the hidden costs and the entry barriers are quite high. Therefore automakers are cautious in their choice of chip suppliers.

But thanks to the joint efforts of China's Ministry of Industry and Information Technology and Chinese electronics companies in alleviating chip shortage pressure, car sales will not be affected too much by the chip shortage.

The report's data also shows Chinese passenger vehicle retail sales in February 2021were at 1.177 million units, up 371.9 percent compared to February 2020, the month most affected by the Covid-19 pandemic, and up 0.3 percent compared to February 2019.

February's retail sales were down 45.5% compared to January, which is essentially the same rate of growth from the previous month relative to the previous years. Due to the late Chinese New Year this year, coupled with the hot demand for new energy vehicles, there was not much demand for traditional vehicles in February.

The report also shows that retail sales of new energy passenger vehicles reached 97,000 units in February, up 675.0% year-on-year and down 37.9% from January.

The new energy passenger car market was diversified in February, with sales exceeding 10,000 units sold by SAIC-GM-Wuling 20,819 units, 18,318 units by Tesla China, and 10,245 units by BYD. Tesla's production reached 23,632 units and its export performance this year was outstanding.

Year-on-year sales performance of Chinese local EV manufacturers, including Nio, Li Auto, WM Motor, Xpeng Motors, Hozon Auto, and Leap Motor, was also excellent in February, the report said.

The divergence in the performance of new energy models by the big auto groups intensified, with SAIC and GAC performing relatively strongly. German luxury car companies BMW, Mercedes-Benz, Audi's pure EVs are in full production, but lack highlights, the report said.