Scooter and motorcycle maker Kwang Yang Motor Co (光陽工業) yesterday said it expects chip constraints to be alleviated by the end of the year at the earliest, after struggling with chip supply since the second quarter.
In addition to chip shortages, rising manufacturing costs due to higher shipping and raw material prices in the first half of this year placed pressure on the company’s profitability, chairman Allen Ko (柯勝峰) said.
“We have been grappling with a chip supply issue over the past few months,” Ko said. “Supply is tight, and we have had to push back shipments by between 20,000 and 30,000 vehicles for overseas markets.”
Photo courtesy of Kwang Yang Motor Co
Demand from the US market has been soaring this year, thanks to the administration of US President Joe Biden’s stimulus packages to revive the economy, Ko said.
“The company’s sales in the US jumped to record highs this year. We could not supply as many vehicles as customers ordered,” because of the chip shortage, he said.
Kwang Yang and its peers are at a disadvantage when securing chip supply compared with smartphone and other electronics makers, due to their smaller market scale, Ko said.
Moreover, chips used in scooters are made using less advanced technologies, but are highly customized, he added.
After some recent positive developments, the company believes “there is a chance the chip shortage could ease in the fourth quarter,” Ko said.
To satisfy foreign customers’ demand, Kwang Yang was forced to source chips on the spot market at prices 10 times higher than normal, Kwang Yang chief executive officer Ko Chun-ping (柯俊斌) said last week.
Due to insufficient chip supply, Kwang Yang has seen its scooter inventory in Taiwan drop to 20,000 vehicles, which is less than half of its monthly sales, it said.
Aside from chips, there is speculation that supply of electric batteries could become tight soon, but Allen Ko said that would not be a serious concern for Kwang Yang as it should be on its suppliers’ priority lists due to the leading position it enjoys in the electric scooter industry, he added.
Kwang Yang mainly sources batteries from LG Chem Ltd.
Allen Ko said scooter sales in Taiwan are expected to plunge 30 percent year-on-year this quarter, worsening from an annual decline of 23 percent last quarter and 10 percent in the first quarter.
The company has also lowered its forecast for scooter sales in Taiwan this year to below 850,000 units, down about 19 percent from the 1.05 million units sold last year.
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