Great Wall Motor two bases may face shutdown of global chip shortage "there will be no improvement in the short term"

On April 24, a reporter from the Financial Associated Press learned from people close to Great Wall that due to the shortage of chips, Great Wall encountered production bottlenecks. In May and June, the two major production bases of Yongchuan in Chongqing and Xushui in Baoding will stop production, affecting many popular models, including the Harvard H6, the Great Wall Artillery, and the Tank 300.

As a result, Great Wall could become the second independent brand after Weilai Motor, which has been revealed to have stopped production due to a shortage of chips. However, because of its large size, Great Wall Motors is more seriously affected than Ulai Motors.

As of press time, Great Wall officials have not responded to the news.

As a matter of fact, there is a growing trend for major car companies around the world to stop production and reduce production. Judging from the statements made by more than two chip companies in the past two days, the problem of chip shortage is very difficult to be solved in a short period of time.

Popular models are affected

The two major production bases where Great Wall Motor may stop production are the core producing areas of Great Wall Motor. Among them, the Great Wall Yongchuan production Base in Chongqing mainly produces Great Wall Gun series pick-up trucks, SUV and other models, with a planned annual production capacity of 160000 vehicles and an annual production capacity of 50, 000 tanks.

The affected Xushui base in Baoding mainly produces Harvard series models and WEY brand series SUV, with a production capacity of 750000 vehicles.

The tank 300 has performed well since its launch in December last year, with cumulative sales of 14323 units from January to March. Even due to the accumulation of too many orders, leading to a long waiting period for consumer vehicles, Great Wall Motor once issued a "Tank 300 suspension order notice", decided to suspend orders from March 28, and "shut down the plant to increase production." Then on April 15th, Great Wall Motor decided to book the tank online at 12:00 on April 19th.

After successfully testing the waters of Tank 300, Great Wall announced the formal independence of the tank brand at the 2021 Shanghai Auto Show, and launched two new cars, Tank 700s and Tank 800s. Thus it can be seen that Great Wall has high hopes for the tank brand.

However, only a few days after resuming the reservation, the tank 300 may once again stop production because of a shortage of chips.

It is worth noting that Great Wall also unveiled more than a dozen new models at the 2021 Shanghai Auto Show. According to the previous introduction of Great Wall Motors, 90% of Great Wall models have achieved L2 intelligent driving assistance, and all newly listed vehicles will be connected to the Internet from this year.

With the increasing demand for intelligence of its models and the improvement of self-driving level, the chip gap of Great Wall has been further widened.

At the beginning of the chip shortage last year, people in the industry were generally optimistic about this problem. But in April, the China Automobile Association again predicted that the chip shortage would have a greater negative impact on Chinese car production in the second quarter than in the first quarter. The bus Association also said in a recent article that the chip shortage began to have a certain impact on terminal sales in the second quarter.

Many of the above popular models are affected, or will have a greater impact on the sales and performance of Great Wall Motor. According to the previous plan, the tank brand plans to sell 100000 vehicles in China this year.

The crisis of "lack of core" continues to spread.

In addition to Great Wall, among domestic independent brands, Xilai recently suspended production for five days due to a shortage of chips. Qin Lihong, co-founder and president of Xilai Automobile, said during the Shanghai auto show that "the problem of 'lack of core' is still very serious," while Zhang Yong, CEO of Naha Automobile, also told reporters bluntly, "Nezha had to give up its public order, which affected 6000 vehicles in the first quarter."

The problem of chip shortage has a more obvious impact on car companies all over the world. Ford's European plant, Jaguar Land Rover's UK plant and Volkswagen's Czech plant all announced on April 23 local time that they would stop or partially stop production at their factories because of chip shortages.

Japan's Mitsubishi Motors also announced on the same day that it would cut production of as many as 16000 vehicles worldwide next month, accounting for about 1/5 of its total output in May based on output in January and February. Daimler said the day before that it would cut the working hours of as many as 18500 employees and suspended production at two factories in Germany.

"as far as the current situation is concerned, the shortage of chips may not be alleviated in the short term." Some people in the industry think.

Bosch, a major supplier of car-grade chips, said after releasing its quarterly results on April 22 that it expected sales and profits to grow this year, but warned that the chips had affected global car production.

"there will be no improvement in the short term." 'The company's top priority is to solve the current problem, 'Bosch said in a statement. Volkmar Denner, Bosch's chief executive, said production at Bosch's new chip plant in Dresden, Germany, would begin in September, three months ahead of schedule, but that still did not solve the supply chain bottleneck.

Bosch's comments came a day after TSMC, an important contract chip manufacturer, issued a statement on April 23 that its board approved a $2.887 billion capital plan to install mature technology capacity. A TSMC spokesman said the move was aimed at meeting growing structural demand and easing global chip supply challenges that have expanded from automotive chips to the global semiconductor industry.

According to TSMC's plan, the additional chip capacity is scheduled to begin mass production in the second half of 2022 and 40000 chips will be available to global customers by mid-2023, while the much-needed 28nm capacity will be deployed as soon as possible.

Optimizing supply chain management may be the best policy

Combing through the chip supply crisis that has lasted for nearly half a year around the world, it is not difficult to find that it has a greater impact on car companies with larger volume and weaker bargaining power in the supply chain; on the contrary, enterprises that strengthen supply chain management are less affected.

The Stellantis Group, formed by the merger of PSA and FCA in January, is a case in point. The production of the car group, which sold more than 8 million vehicles worldwide last year, has been affected by a "lack of core" in major markets such as North America and Europe, but in the Chinese market, it "survived" due to the small production and sales scale of its joint ventures, DPCA and Guangzhou Auto Fick.

"the impact of the chip shortage on our operations in China is very limited and very small." Olivier, member of the global executive committee of Stellantis Group and chief operating officer of China, told reporters.

BMW also survived, but for different reasons.

"in terms of chip supply, we have already completed orders worldwide a long time ago, and we are monitoring and managing the supply situation every day. At present, there is no suspension of production due to lack of core." Gaulle, president and CEO of BMW Group Greater China, told the Financial Associated Press.

The supply chain crisis, which is sweeping the world, has also triggered the reflection of auto executives.

"this is probably the biggest supply chain crisis I have ever seen, as terrible as it was in the early stages of the epidemic." Ford Jim Farley (Jim Farley) said on April 23rd local time that the crisis had prompted Ford to rethink how to purchase key components such as chips. "over the past few weeks I have been studying chip supply in other industries to learn from experience.

After some research, Farley came up with some key information, including: most industries use safety inventory of key components such as chips, maintain diversified supply channels, and many companies pay for chips several years in advance. "these experiences are worth learning from the auto industry." Farley said.

In addition to supply chain management, the response to the crisis can also reduce losses to some extent.

After Hyundai released its results for the first quarter of this year, some South Korean analysts believe that although Hyundai may cut some production in the second quarter because of chip shortages, it may not be much affected. "this is because a favourable market environment supported by strong demand and average sales prices boosted by high-margin car sales may help offset the decline in production."