The shortage of auto parts has imposed an unprecedented challenge to China’s automobile industry whose retail sales may grow by zero this year. From March on, the Omicron wave caused widespread strict lockdowns in Shanghai and Jilin Province, two of the main auto parts manufacturing and distribution centers in the country. Meanwhile, price hikes of auto chips, batteries and raw materials forced manufacturers to increase sales prices for new vehicles. Even though some manufacturers resumed production in April, lack of staff and blocked logistics are causing problems. Starting in March 2020, the government adopted policies to boost the auto market, including tax rebates for purchasing new-energy vehicles, facilitating second-hand vehicle trading and relaxing restrictions on buying passenger vehicles. But rising auto prices and weakened expectations over household income will continue to make consumers hesitant to buy cars.
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