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Chip shortage forces German carmakers to cut production

Business news |
By Christoph Hammerschmidt


According to various media reports, more than 10,000 employees at the Audi production plants in Ingolstadt and Neckarsulm will have to be put on short-time work from next week. Audi is thus following in the footsteps of its parent company Volkswagen, which recently had to temporarily suspend work on its high-volume Golf model due to a shortage of semiconductor components for production (eeNews Europe reported).

At Audi, production of the A4 sedan and the A5 cabrio will be affected for the same reason. Initially, the short-time work is to last until the end of January.

According to a report in the trade journal automotive IT, Daimler is also having to shut down its production for the same reason: There is a shortage of chips for the Pre-Safe assistance system for the Mercedes models A, CLA, GLA, GLC and the entire B-class. Not all vehicles are affected, but only those with this special equipment. The delivery of these vehicles will be postponed until “at least May”, as reported by automotive IT with reference to sources in the corporate environment.

But that is not all: for the prestigious E-Class, the cuts in the supply chain are so severe that many vehicles cannot be delivered to customers until the fourth quarter.

The reasons for the delivery bottlenecks are similar in all cases – and they are indirectly related to Covid-19: The pandemic had caused significant sales declines in the automotive industry worldwide last year. In the first five months of 2020, a good 3.3 million new passenger cars were registered in the EU, 41.5% fewer than a year earlier. VW alone had originally planned to produce 3.6 million new cars worldwide in 2020. The consequence: companies along the automotive value chain cancelled their orders for chips in heaps.


As a result of this drop in demand, many semiconductor manufacturers switched their production to other customer industries. Thus, companies from the consumer electronics sector were able to book their production facilities with the semiconductor industry for the production of new smartphones with 5G functions or for new gaming platforms – and the chip manufacturers were happy to compensate for the slump in demand from the automotive industry with other orders.

But the auto industry recovered faster than feared, plus the strong growth of electrified vehicles continues to drive demand for semiconductors in the automotive industry, as these models require significantly more semiconductors than cars with conventional drive systems. “The current challenges are not structural problems that require an increase in investment to fix,” automotiveIT quotes IHS Markit analyst Phil Amsrud as saying. “They are the result of a perfect storm of non-automotive segments consuming wafer fab capacity with new products ahead of the holidays.”

In the semiconductor industry, Intel’s historic order to TSMC was an exacerbating factor – it came before the auto industry could foresee its impending recovery. As a result, the auto industry now has to share top priority at semiconductor manufacturers with customers in other industry segments. “It seems s that the first half of 2021 will be a difficult time for the (automotive) industry,” the analyst commented.

Related articles:

Chip shortages cut VW car production

Impact of Covid-19 on the Supply Chain

Covid-19 brings car production in Europe to a halt


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