China's Car Sales Declined for Third Straight Month in August on Chip, Component Shortages

By Erin Mendell

China's car sales declined for the third straight month in August compared with a year earlier, as the global shortage of semiconductors and other components hurt more car makers and further dented their output.

Last month, retail sales of passenger cars dropped 14.7% to 1.45 million vehicles from a year earlier and declined 3.3% from July, the first month-over-month decline for August, the China Passenger Car Association said Wednesday. Sales had fallen 6.2% in July and 5.1% in June, compared with a year earlier.

Sales of new-energy vehicles, including electric cars, more than doubled from a year earlier to 249,000 vehicles, the association said. It raised the sales forecast for such vehicles this year to 3.0 million.

Analysts and industry executives expect the global chip-supply shortage to be prolonged, mainly because of a Covid-19 surge in Malaysia. Major semiconductor suppliers have their plants for packaging and testing, the final stage of chip production, in the Southeast Asian country.

"The overall market in September is still very challenging as it is undergoing a special period where demand is determined by supply," said Cui Dongshu, secretary-general of the association.

Fitch Ratings forecast China's passenger car-sales to grow around 5% this year, revised down from high single digits.

Foreign auto manufacturers have been hit harder by the shortages than their Chinese rivals. Honda Motor Co. said Saturday that its sales in China tumbled 38.3% in August compared with a year earlier because of the pandemic and component shortages. Toyota Motor Corp.'s China sales fell 11.9%, and Nissan Motor Co.'s sales in the country dropped 10.6%, the companies said. Sales of two Volkswagen China joint ventures slid 38.9% and 22.5%, respectively, car association data show.

Chinese brands have been more resilient than global peers, thanks to their flexibility in tapping alternative suppliers, said the car association's Mr. Cui. Sales of China's BYD Co. surged 86.3% last month, the company said.

Foreign joint ventures in China will remain vulnerable to stressed chip supplies, as their parents are more likely to give other regions priority when allocating chips, said Jing Yang, corporate research director at Fitch.

Tesla Inc. sold 44,264 made-in-China vehicles in August, 71% of which were exported to other markets, the car association data showed. Bloomberg reported that Tesla's Shanghai factory partly halted production for days because of a lack of chips.

NIO Inc. cut its delivery target for the July-to-September quarter by as much as 6%, after a trim supplier in the eastern city of Nanjing suspended production for weeks in August because of Covid-19 infections.

To ease car makers' production bottlenecks caused by tight chip supplies, the Chinese government last week simplified and shortened the processes for auto makers to modify chip-related technical parameters.

--Raffaele Huang contributed to this article.

Write to Erin Mendell at [e-mail]

(END) Dow Jones Newswires

09-08-21 0535ET