Chip shortage leads to sharp drop in China’s June auto sales, industry expects: too much uncertainty in second half

The China Association of Automobile Manufacturers reported Friday (July 9) that car sales in China fell 12.4 percent year-on-year in June, constrained by a chip shortage.

The chip supply shortage has forced automakers around the world to adjust production rates accordingly. Chip makers complained that chip production failed to meet market demand due to rising raw material prices and slow progress in economic recovery after the epidemic than expected.

In June, China, the world’s largest auto market sold a total of 2.02 million vehicles. From January to June this year, China’s car sales were 12.89 million units, an increase of 25.6% over last year.

However, compared to 2019, the year before the outbreak, car sales were down 4.4%. Passenger car sales fell 1.4 percent in the first half of the year. in June, passenger car production fell 13.7 percent from a year earlier and sales fell 11.1 percent to 1.6 million units.

The China Association of Automobile Manufacturers (CAAM) is “cautiously optimistic” about the outlook for the auto market in the second half of the year. The association’s main concerns are: the global economic recovery and epidemic prevention and control are still unstable and uncertain factors, the basis for sustained economic recovery needs to be further consolidated, especially the chip supply problem on the impact of enterprise production is still more prominent, the sharp rise in raw material prices increased the cost pressure on enterprises. The association believes that all these problems will affect the automotive industry.

Before that, China’s auto demand has also softened significantly due to the U.S.-China trade war and slowing economic growth, said the Associated Press. Although China’s economic recovery started relatively early, sales of passenger cars in China fell sharply by 22.4 percent in the first half of last year, which provides a low reference point for this year’s figures.

The new figures show that sales of new energy vehicles are not performing well. Cumulative sales of these vehicles have matched the 2019 full-year level, with more than 1 million pure electric vehicles. The penetration rate of new energy vehicles has also increased from 5.4% at the beginning of the year to 9.4% in the first half of this year, including more than 12% in June, indicating a gradual expansion of the emerging power market.