Price hikes are unavoidable, Li Shaohua responds to chip shortage.

Recently, the topic of the chip shortage and its potential impact on China’s automobile production has sparked a heated discussion. At the beginning of this year, due to the COVID-19 pandemic, automotive companies slowed down production. However, as the Chinese economy bounced back, the demand for automotive chips has also increased significantly.

According to Reuters, last Friday, Volkswagen Group warned that although suppliers have increased production capacity, the new output can only sustain the next six to nine months of use. Therefore, the component shortage is likely to continue to affect automotive deliveries until 2021.

In response to this, Li Shaohua, the Deputy Secretary-General and Director of Industrial Development Department of China Association of Automobile Manufacturers (CAAM), gave an interview to “Auto Review,” a magazine under CAAM. Li stated that CAAM has conducted joint research with relevant companies and submitted a report to the relevant authorities.

According to “Auto Review,” CAAM indicates that the reasons for the chip shortage can be mainly summarized into four points. Firstly, the global chip industry’s production capacity and predictions are relatively conservative. Secondly, the rapid advancement of 5G technology has accelerated the demand for chips. Thirdly, the COVID-19 pandemic has led to a decline in production capacity. Fourthly, the continuous improvement of electrification, intelligence, and networking of automobiles has increased the demand for global automotive chips faster than the growth rate of vehicle sales. These factors have caused a supply-demand imbalance for chips.

CAAM also stated that the supply-demand imbalance of automotive chips is a common issue faced by the global automobile industry and related industries. Regarding next year’s situation, Li Shaohua believes that some companies’ production may be significantly affected in the first quarter of next year, but the impact will not be significant for the whole year. At present, it is impossible to make a quantitative estimate due to longer enterprise stock cycle and insufficient short-term production capacity, which makes price increases inevitable.

However, Li Shaohua emphasized that the Chinese automobile industry should take a rational approach to this contradiction of chip supply-demand imbalance, actively take measures to cope, arrange production rhythms reasonably, adjust stock cycles, increase supplier selection, and optimize supply chain layout.

🔗Information source: Auto Review, Reuters

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email