Tesla’s Chinese Rival Nio Suspends Production on Chip Shortage

March 26, 2021 Updated: March 26, 2021

Chinese electric vehicle maker Nio became the latest carmaker to temporarily suspend production on Friday as a result of a global semiconductor chip shortage that has led to major losses.

Ford Motor, Honda Motor, General Motors and Volkswagen were among the automakers caught off guard by the shortage, forcing many to hold back production even as car demand picked up during the pandemic.

Chip shortages have cost the global auto industry 130,000 vehicles in lost production, research firm AutoForecast Solutions estimates, with the heaviest impact in North America, with 74,000 units lost, and Western Europe, with 35,000 lost.

The chip scarcity is also a result of an increased demand from the consumer electronics industry as people worked from home and played more video games during the crisis. Sanctions against Chinese technology companies have also played a role.

Nio, one the main challengers to Tesla, which dominates the EV market in China, said it would halt production for five working days at its Hefei plant and cut its first-quarter delivery forecast by as much as 1,000 vehicles.

Shares of Nio, which makes the ES8 and ES6 electric sport-utility vehicles, were down more than 8 percent in U.S. mid-afternoon trading.

Nio, which also faces competition from home-grown rivals such as Xpeng Inc, now expects to deliver 19,500 vehicles in the first quarter, down from a 20,000 to 20,500 range previously.

Ford had warned the shortage could hit its 2021 profit by up to $2.5 billion, while larger U.S. automaker GM expects the crisis to shave up to $2 billion off its full-year profit.

Ford, which was until now assembled its highly profitable F-150 without certain parts, said on Thursday it will idle production of the trucks at a plant in Michigan through Sunday.

GM and Japan’s Honda both said this week they would continue production suspension at plants in North America for the coming weeks.

Swedish truck maker Volvo AB meanwhile said on Tuesday the chip shortage would have a “substantial” impact on its second-quarter earnings, and it would implement stop days across its sites globally beginning in April.

By Sarah Morland, Josh Horwitz and Ankit Ajmera