Tesla's Chinese rival Nio suspends production on chip shortage

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 from next week and cut its first-quarter delivery forecast by as much as 1,000 vehicles.

A logo of the electric vehicle maker NIO is seen at its store in Beijing, China August 20, 2020.  (REUTERS)

Chinese electric vehicle maker Nio on Friday became the latest automaker to temporarily suspend production because of a global semiconductor chip shortage that has shut down plants and resulted in major losses for the sector.

Top automakers such as Ford, Honda, GM and Volkswagen were caught off guard by the shortage even as auto demand picked up during the Covid-19 pandemic, forcing many of them to hold back production.

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 health crisis.

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 from next week 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, fell more than 7% in U.S. premarket trading. The company also faces competition from home-grown rivals such as Xpeng Inc.

Nio now expects to deliver 19,500 vehicles in the first quarter, down from a range of 20,000 to 20,500 vehicles it had previously expected.

Sanctions against Chinese technology companies have also played a role in the global shortage of chips.

US automaker Ford Motor had warned the shortage could hit its 2021 profit by up to $2.5 billion, while its larger rival General Motors Co expects the crisis to shave up to $2 billion off its full-year profit.

Ford, which was until now assembling its highly profitable F-150 pickup trucks 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 Motor Co Ltd both announced 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 announced it would implement stop days across its truck manufacturing sites globally beginning in April.