Nio Forced To Halt Production, Lower Q1 Deliveries Forecast As Chip Shortage Comes Haunting

Global chip shortage is severely impairing automakers, as evidenced by an announcement from Chinese EV maker NIO Limited NIO Friday.

What Happened: Nio is temporarily halting vehicle production activity in the JAC-NIO manufacturing plant in Hefei for working days starting March 29, the company said in a statement.

The stalling comes due to a shortage in semiconductor supply, the company added.

As a result of this development, Nio lowered its vehicle deliveries forecast for the first quarter from 20,000-20,500 vehicles to 19,500 vehicles.

Related Link: Is The Nio Sell-Off Overdone?

Why It's Important: The news comes at a time Nio has been seeing a slight loss of momentum in vehicle sales. After record deliveries of 7,225 vehicles in January, sales declined month-over-month to 5,578 in February.

This would leave the company shooting for a target of 6,697 vehicles in March.

In the December quarter's earnings call, CEO William Li suggested the EV maker had sufficient chip supply to support production for the time being but hinted at production getting hit in the second quarter.

"We believe for the second quarter, we should have the chip supply to meet our basic demand, but the risk is still quite high," Li had said at the time.

Nio is not the only one facing this predicament. Increasing demand from sectors leveraging the "work-from-home" and "study-from-home environment" in the aftermath of the pandemic has exerted pressure on the chip supply chain. Since the chip industry is manufacturing-intensive, it is extremely difficult to bring increased production online in a swift manner.

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South Korean electronics giant Samsung is expected to delay the launch of the latest iteration of its Galaxy Note 21 due to chip shortage.

Traditional automakers, including General Motors Company GM and Ford Motor Company F, have announced production cuts at their North American plants, citing the issue.

The Chinese auto industry is also feeling the finch, with auto production declining in the mid-teens percentage on a month-over-month in January.

In premarket trading Friday, Nio shares were down 0.50% to $37.75.

Related Link: Nio's Second-gen Battery Swap Station To Come In Two Versions: Report

Photo: Courtesy of Nio