The resources for auto chips in circulation are close to depletion, Chinese auto brands no longer have a clear advantage in chip resources, said the deputy secretary-general of the CAAM.

Chinese automakers are doing everything they can to find chip resources to ensure production, but the problem still needs to be warned, said Li Shaohua, deputy secretary-general of the China Association of Automobile Manufacturers (CAAM).

"Now that the resources for auto chips in circulation are close to depletion, Chinese auto brands no longer have a clear advantage in chip resources, requiring related companies to prepare in advance," Li was quoted as saying by the Securities Times on Wednesday.

Since the beginning of 2021, the market share and scale of China's local auto brands have continued to rise, firstly because of the improvement in product quality, which has made their brands more competitive. At the same time, this is also related to the chip sourcing situation, Li said.

Joint ventures use a global procurement system, which generally uses stable, long-term procurement agreements, and once the supply of automotive chips is cut off, they can only take measures to reduce or stop production. While Chinese automotive companies will try every possible way to find resources to ensure production through a variety of ways, Li mentioned.

"The supply-demand imbalance for automotive chips has not improved, coupled with the impact of unexpected events such as the Covid-19 outbreak, it is difficult to predict future trends," the report said, citing comments from industry experts at a fall media briefing hosted by the CAAM.

"Basically, cars are being produced as much as chips are being produced, and car production and sales in the coming months will be largely dependent on chip supply," the experts said.

In August, China's auto production and sales reached 1.725 million and 1.799 million units respectively, down 18.7 percent and 17.8 percent year-on-year, the CAAM's data showed.

However, China's new energy vehicle market continued to outperform the overall market in August, with both production and sales exceeding 300,000 units for the first time, setting another record high.

In August, China's new energy vehicle production and sales were 309,000 and 321,000 units respectively, up 8.8 percent and 18.6 percent from the previous month and both up 1.8 times year-on-year, the CAAM's data show.

From January to August, China's new energy vehicle production and sales reached 1,813,000 and 1,799,000 units, respectively, with year-on-year growth of 1.9 times in both cases.

Although local Chinese car companies seem to be more flexible in dealing with the chip shortage, its impact cannot be ignored.

Nio said on September 1 that it delivered 5,880 vehicles in August, up 48 percent from a year earlier and down about 26 percent from July.

The company then lowered its previous estimate for third-quarter deliveries by 500-1,500 units, expecting 22,500-23,500 deliveries in the third quarter, down from the 23,000-25,000 guidance it gave when it reported its second-quarter results on August 12.

Nio blamed this on the impact of Covid-19 on its supply chain, saying that the single supplier of A/B pillar interior panels for ES6 and EC6, Nanjing Nantiao Quanxing, had shut down its plant for a period of time, which affected supply. However, the supplier has resumed production.

In addition, the Covid-19 outbreak in Malaysia affected chip production at STMicroelectronics, which is a supplier of Bosch ESP, thus affecting Bosch's supply to Nio.
When announcing August deliveries, Nio also said it could set another monthly delivery record in September if supply chain problems do not worsen.

On September 20, Nio's local counterpart Li Auto lowered its delivery guidance for the third quarter by 500-1,500 units, saying the Covid-19 in Malaysia has caused a serious hindrance in the production of dedicated chips for its millimeter-wave radar supplier.

Li Auto now expects its deliveries in the third quarter to be about 24,500 units, compared with its previous guidance of 25,000-26,000 units, because of a slower-than-expected recovery in chip supply.

Li Auto said it will continue to monitor ongoing market conditions and work closely with supply chain partners to minimize the impact of the chip shortage on its production.

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