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Stellantis, Tesla's Chinese rival Nio cut production due to chip shortage

[March 27, 2021] (Reuters) -Stellantis NV and Chinese electric vehicle maker Nio became the latest carmakers to announce new production cuts as a result of a global semiconductor chip shortage.

Stellantis said on Friday it will temporarily halt production at five North American plants next week because of the global microchip shortage: two assembly plants in Canada, one in Mexico and two in the United States. The production halts will start next week through early to mid-April.

The plants affected are the company's Toluca, Mexico facility, where it produces the Jeep Compass; Windsor Assembly in Ontario where it builds Chrysler Pacifica minivans; a plant in Illinois that builds the Jeep Cherokee SUV; a Michigan plant that builds the Ram 1500 Classic pickup and another Ontario plant that builds the Chrysler 300, Dodge Charger and Dodge Challenger.

Stellantis did not specify how long the shutdowns would last, but a union local in Windsor said the minivan plant would halt production for four weeks starting on Monday.

Nio, one the main challengers to Tesla, which dominates the electric vehicle (EV) market in China, said it would halt production for five working days at its Hefei plant 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, ended the day down 4.8% on the New York Stock Exchange.

Ford Motor, Honda Motor, General Motors and Volkswagen were among the automakers caught off guard by the shortage, forcing many to hold back production even as car demand picked up during the pandemic.

Chip shortages have cost the global auto industry 130,000 vehicles in lost production, research firm AutoForecast Solutions estimates, with the heaviest impact in North America, with 74,000 units lost, and Western Europe, with 35,000 lost.

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Chinese electric vehicle start-up Nio Inc. vehicles are on display in front of the New York Stock Exchange (NYSE) to celebrate the company’s initial public offering (IPO) in New York, U.S., September 12, 2018. REUTERS/Brendan McDermid/File Photo

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 crisis. Sanctions against Chinese technology companies have also played a role.

Nio, which also faces competition from homegrown rivals such as Xpeng Inc, now expects to deliver 19,500 vehicles in the first quarter, down from a 20,000 to 20,500 range previously.

Ford had warned the shortage could hit its 2021 profit by up to $2.5 billion, while larger U.S. automaker GM expects the crisis to shave up to $2 billion off its full-year profit.

Ford, which was until now assembled its highly profitable F-150 without certain parts, said on Thursday it would idle production of the trucks at a plant in Michigan through Sunday.

GM and Japan's Honda both said 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 it would implement stop days across its sites globally beginning in April.

(Reporting by David Shepardson in Washington, Sarah Morland in Gdansk, Josh Horwitz in Shanghai, Ankit Ajmera in Bengaluru and Paul Lienert in Detroit; Editing by Peter Graff, Arun Koyyur, Alexander Smith and Jonathan Oatis)

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