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Electric cars in China

Chinese EV maker Nio calls 5-day work halt over chip shortage

Lack of supplies pushes quarterly delivery forecast down to 19,500 cars

Nio CEO William Li, here unveiling a new sedan in Chengdu, China, on Jan. 9, said this month that 'the risk is still quite high' of further chip shortages.

HONG KONG -- Chinese electric vehicle startup Nio said it will suspend production at its main plant in Hefei Province for five working days due to a shortage in chip supplies.

"The overall supply constraint of semiconductors has impacted the company's production volume in March 2021," Nio said in a statement on Friday.

The shutdown will reduce the carmaker's estimated deliveries to 19,500 cars for the quarter ending March 31.

Nio Chief Executive William Li had forecast output of 20,000 to 20,500 vehicles during a call with analysts on March 1. Nio delivered 17,353 in the October-December quarter.

Li warned then that the global shortage of auto chips was having a "very big impact" on the company's supply chain and had limited its production capacity to 7,500 units a month. It would otherwise have reached 10,000, he said.

Li expected the situation to improve in the second quarter, with chip supplies meeting basic demand, though he warned "the risk is still quite high" of further shortages.

A global shortage of semiconductors is plaguing the auto industry because vehicle sales recovered faster than expected from the coronavirus pandemic. Many manufacturers reduced their chip orders in anticipation of weaker sales numbers amid slowing economic activity, and chipmakers have not been able to ramp up production to meet the resurgent demand.

Nio doubled its sales last year despite the aggressive price-cutting strategy of Tesla for its China-made vehicles. Nio's share price rose more than 10 times over the past 12 months, pushing its valuation higher than most established automakers.

The Hefei factory belongs to state-owned JAC Motors, which assembles Nio's cars through a joint venture with the upstart. The partners are building another factory nearby.

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