China's automobiles sales decline as global chip shortage impacts production

China’s car sales are plummeting even as the demands for semiconductors and the process of raw materials have been witnessing a surge. This has reportedly further strained the country’s economic recovery while weighing down on global trade. The Wall Street Journal reported citing the China Passenger Car Association that the sale of passenger cars in June were down 5.1% from the year earlier to 1.58 million vehicles. Meanwhile, as per the report, the April-June sales witnessed an uptick by 2.3% from the same period last year when the market started recovering from the tolling COVID-19 pandemic. 

Reportedly, the association has said that the decline in China’s automobile sales could be due to constraints in the supply chains that have now emerged in recent months. The significant chip shortage has limited the production for automakers across the globe including some in China, the group also noted. With the shortage of chips that emerged last month, Japan’s carmakers were among the hardest hit. Reportedly, Nissan Motor Co.’s sales were down 16% in June 2021 from 2020. Meanwhile, Honda Motor Co.’s were also off by 17% and it cited component shortages.

Supply constraints to ease in 2021 second half

The car association has reportedly predicted that the supply constraints would ease in the second half of the year. As of now, Nikkie Asia has reported that the global chip crunch had restricted only a limiter part of the Chinese auto market. Several vehicle plants have resumed operations after COVID-19 cases decreased in the spring of 2020that further enabled them to secure semiconductor components earlier than factories abroad. 

News agency ANI quoted a source at a  large Japanese automaker saying that with auto sales recovering in China “we're prioritizing supplies to Chinese factories”. Reportedly, the source echoed the decisions made by several international companies. But, the global chip shortage persisted longer than predicted and its impact has started raising concerns in Chinese automaking. 

"We want to lift output of popular sport utility vehicles, but we're forced to cut production by the shortage of semiconductors," an executive at state-owned Chongqing Changan Automobile said as per ANI. The Chinese auto industry and its associated services account for an estimated 10% of gross domestic product. 

IMAGE: AP