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Chip shortage leaves Tesla and other electric car buyers in China waiting months for new vehicles

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The ongoing global chip shortage has left car buyers in China waiting several months for newly purchased vehicles to arrive, as assemblers and component manufacturers struggle to keep up with demand.

The electric vehicles (EVs) market has been especially hard-hit owing to its need for more semiconductors than traditional carmakers. Premium cars that need more chips for driver assistance and other electronic systems remain in high demand despite a slowdown in production.

Two sales managers at Tesla, the global leader in EV sales, said buyers ordering Shanghai-made Model 3 and Model Y vehicles will not see their new cars until the end of the first quarter.

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“Insufficient supply of chips is a major stumbling block to sales growth ahead of the Lunar New Year,” said Tian Maowei, a manager with Yiyou Auto Service in Shanghai. “Some buyers have lodged complaints about a long delay of the deliveries.”

Supply problems continue to ravage the automotive industry after a rough 2021. The chip shortage forced Chinese carmakers to slash production by more than 1 million units last year, according to AutoForecast Solutions, which compiles production estimates for the industry. Globally, the chip crunch is estimated to have resulted in 11 million fewer cars being produced, according to the company.

Analysts expect the chip shortage to force smaller assemblers to suspend production this year.

In mainland China, the world’s largest automotive market, global foundries can only produce enough semiconductors, microcontrollers and high-end chips with artificial intelligence (AI) processors for about 4 million new energy vehicles (NEVs), according to the China Passenger Car Association (CPCA). That leaves a shortfall of 1 million vehicles based on the guild’s forecast for demand this year of NEVs, a term used in China to refer to electric and hybrid vehicles.

“A shortfall is not only affecting production volume, but causing delayed deliveries,” said Chen Jinzhu, chief executive of Shanghai Mingliang Auto Service, a car maintenance and insurance company. “Nearly all premium editions of global car brands, from Volkswagen to BMW, are victims of shortage woes.”

Tesla’s China-made Model 3 vehicles seen during a delivery event at its factory in Shanghai on January 7, 2020. Photo: Reuters alt=Tesla’s China-made Model 3 vehicles seen during a delivery event at its factory in Shanghai on January 7, 2020. Photo: Reuters>

Buyers of those cars will have to wait at least a month for the vehicles to be delivered, said Eric Han, a senior manager at the Shanghai-based business advisory firm Suolei.

William Li, chief executive of Shanghai-based Nio, one of the three leading mainland EV start-ups, said the global auto chip supply chain is still vulnerable to any outbreak of Covid-19, which could cause a suspension of production.

“I reckon the chip shortage woes will be eased in the second half of 2022 as new capacity is added,” he told reporters during a media briefing on December 19.

Semiconductor lead time, or the time between when a product is ordered and when it ships, was still increasing as of last month, according to research this month from Susquehanna Financial Group. It increased to 25.8 weeks in December, six days longer than the month before.

Despite supply disruptions, passenger car sales in China are estimated to have increased 4.1 per cent year on year to 20.09 million units in 2021, according to the CPCA. The collection and analysis of full-year sales data is not yet finalised.

The year-on-year rise, buoyed by a soaring penetration rate of NEVs, would end a three-year losing streak from 2018 to 2020.

However, rapid growth in chip-hungry NEVs from the likes of Tesla and Nio could also worsen the semiconductor shortage by further driving up demand.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.

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