In 2023, automotive chips will continue to play an important role in global semiconductor trade, but both mainstream automakers and EV startups are making a strategic turnaround due to their different demand scales, yet with a common goal to consolidate and even grow their market shares and competitiveness, according to industry sources.
Mainstream carmakers have seen their profit margins squeezed by continuous shortages in chips supply and rises in quotes, and some clients have cut orders amid inflation and other unfavorable macro factors, significantly reducing the queue of car buyers, the sources said.
To fulfill orders in hand as soon as possible, mainstream automakers have moved to slash demand for chips for the whole cars by reducing paired accessories, the sources noted, adding that the strategy runs the risk of drawing complaints from loyal customers about price increases in a disguised form and even losing their patronage once peer car brands lower prices to stimulate sales.
In contrast, Tesla, which also experienced a rapid decline in orders, has continued to cut prices to stimulate demand in the past quarter, thereby snatching orders from competitors. Chinese media reports indicated that Tesla saw its January store orders shoot up over 500% on month following a major price cut announced in early 2023 for the China market, but Chinese EV makers can hardly follow suit due to the government cancelling its subsidies for new energy cars.
Tesla also increases the proportion of industrial and automotive-grade chips in its EVs, aiming to expand its market shares and win greater customer trust with better performance stability of its products.
Over the past two years, mainstream automakers and EV startups have differed starkly in responding to shortages of automotive chips. The former were reluctant to change their car designs as they stick to traditional vehicle regulations, and can only offer gifts to pacify consumers kept waiting for car delivery. They include carmakers in Europe, the US, Japan, South Korea and joint-ventures between Chinese and foreign makers.
Affected by chips shortages, their customers had to wait in long queues and some impatient ones even turned to purchase from the second-hand car market. Mainstream carmakers, in order to maintain their business interests, can focus on production of hot-selling models, virtually reducing the procurement options for customers as a result.
As to Tesla and other Chinese EV brands, they tend to quickly adjust their car designs and actively incorporate alternative solutions, supplemented by their own testing and verification operations, so as to accelerate the build-up of their vehicles.
Article translated by Willis Ke
