China Vehicle Sales Fall Amid Chip Shortages as Companies Drive up Prices

Employees work on an assembly line at an auto plant of Dongfeng Honda in Wuhan in China's central Hubei Province on March 23, 2020. (STR/AFP)

Data show China’s vehicle sales dropped 17.8 percent in August from a year earlier due to a pandemic-induced chip crisis, falling for a fourth consecutive month since May.

Overall nationwide sales stood at 1.8 million vehicles in August, in figures released by the Beijing-based China Association of Automobile Manufacturers on Sept. 10.

“The trend of China’s annual auto production and sales depends on the supply of chips,” said Xu Haidong, the deputy chief engineer of the association.

A prolonged global chip shortage has affected major automakers in China, including Ford, Honda, and Volkswagen, forcing many to cut production at plants.

Recently, the shortage saw three auto chip sales companies driving up prices—including two in Shanghai and one in Shenzhen—trading chips at up to 40 times the purchasing price, Chinese state-run news agency Xinhua reported.

It said the profit for auto chips would take up 7 to 10 percent of the cost in a market that’s in equilibrium.

Microchips are key components that allow the function of numerous computer-controlled components in a vehicle, such as airbags, touchscreens, and engines. A new vehicle could require hundreds of semiconductor chips.

China’s Ministry of Industry and Information Technology said on Monday that it was seeking alternative solutions to address the auto chip supply shortage.

Reuters contributed to this report.