NIO may fail to meet second-quarter output goal in its competition with Tesla as global shortage of chips hits home

Daniel Ren
·3-min read

NIO, one of three US-listed Chinese electric car makers that compete with Tesla, said its breakneck growth pace may be held back, as the global shortage of computer chips that have hobbled the global automotive industry hits home.

The Beijing-based carmaker may lack the semiconductor stockpile to meet its target of assembling 7,500 electric cars in the second quarter, NIO’s founder and chief executive William Li said during a press ceremony in the Anhui provincial capital of Hefei, where the carmaker’s 100,000th unit rolled off the assembly line.

“We still face difficulties in achieving our production goal,” Li said after officiating a ceremony for a blue ES8 sports-utility vehicle (SUV) to come off the production line. “The issue (of chip shortage) remains tough in the second quarter, but it will affect our production only in the near term.”

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The global chips shortage is finally having its effects felt in the world’s largest vehicle market, after roiling carmakers in North America, Europe and Japan for months. SAIC Motors, China’s largest carmaker and the local partner to Volkswagen and General Motors, will probably have to slash its production by 200,000 vehicles due to the shortage of chips, Bloomberg reported today, citing people familiar with the matter.

Use of microcontrollers in cars
Use of microcontrollers in cars

NIO had to suspend production for five days at the end of March due to the shortage of a US$1 chip. The shortfall may not be as dire, as the carmaker expects to secure enough chips for controlling everything from its onboard entertainment and engine systems to the steering in the third quarter to ensure the smooth running of its assembly, Li said.

Still, a monthly production level of 7,500 vehicles would “fall below optimistic forecasts made at the end of 2020, because the three Chinese competitors of Tesla have showed signs of a big sales jump,” said Tian Maowei, a sales manager at Yiyou Auto Service in Shanghai.

The 100,000th electric vehicle rolling off NIO’s production facility in the Anhui provincial capital of Hefei on April 7, 2021. Photo: Daniel Ren
The 100,000th electric vehicle rolling off NIO’s production facility in the Anhui provincial capital of Hefei on April 7, 2021. Photo: Daniel Ren

China surpassed the United States in 2009 as the world’s largest vehicle market, and already has more automobiles running on electricity than anywhere else on earth. Tesla is still the clear market leader in this market, as its Gigafactory 3 plant in Shanghai continues to churn out Model 3 and Model Y electric cars for the country’s rapidly expanding middle class and young first-car buyers.

Out of an industry teeming with an estimated 500 assemblers, the trio of US-listed EV makers – NIO, Xpeng and Li Auto – are catching up fast with Tesla, helped by generous state subsidies and a rapidly expanding infrastructure of charging stations. NIO, founded in 2014, reported a fourfold leap in first-quarter deliveries, selling 20,060 vehicles, with 7,257 units delivered in March alone.

The company’s ultimate goal is to deliver more than 1 million electric cars a year to occupy a solid footing in the premium market segment currently dominated by automotive marques such as Audi, BMW and Mercedes-Benz, Li said.

Microcontrollers
Microcontrollers

“In the long term, NIO and its Chinese peers still have huge growth potential as an increasing number of young drivers are attracted by their models,” said Yiyou’s Tian.

The global shortage in semiconductor chips has wreaked havoc on the automotive industry, with car makers from Ford Motor to Volkswagen forced to scale back production.

IHS Markit estimated that global output of internal combustion engine (ICE) vehicles would shrink by up to 700,000 vehicles in the first quarter, about 4 per cent of worldwide production.

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