Chip shortage continues to hit car production, suppliers

September 28, 2021 // By Christoph Hammerschmidt
Chip shortage continues to slow down global car production
The chip shortage is continuing to hit car production and suppliers in Europe,

Consulting firm Alix Partners has increased its projections, noting the car industry will produce 7.7 million fewer vehicles worldwide than it could under normal delivery conditions. This corresponds to a lost turnover of $210 billion (approx. € 179 billion). This is well above the company's May estimate of $110 billion. It also shows the situation is not only related to faulty order management in the auto industry, but continues to be related to outages due to the ongoing pandemic.

"Contrary to many earlier expectations, chip production capacity has not yet recovered and pre-crisis levels are far from being reached. Among other things, production cutbacks caused by Covid-19, e.g. currently visible in plants in Malaysia, have not abated. Thus, we assume that more than 7 million fewer vehicles can be produced worldwide this year due to the chip shortage. While the OEMs can compensate for this with partly higher vehicle prices, the suppliers are finding it more difficult and, in our estimation, are even more affected by the chip shortage than the OEMs," says Dr Marcus Kleinfeld, Managing Director at AlixPartners in Germany.

Not only the car manufacturers themselves, but also the suppliers are groaning under the supply shortage. According to media reports, Volkswagen is currently only running the early shift at its main plant in Wolfsburg, and only on one production line; all other production lines in Wolfsburg are at a standstill. When presenting its quarterly figures in August, the supplier Continental already warned that the shortage of semiconductors would slow down car production for the entire rest of the year. "Overall, the chip shortage as well as rising raw material prices will weigh on the automotive industry throughout 2021," Continental CEO Nikolai Setzer said.

Electronics and lighting supplier Hella also said the market bottleneck was impacting sales when it presented its quarterly figures last week. Although business overall had been better than the market in the first half of the year, the company lowered its sales expectations for the current fiscal year 2021/2022. "Despite full order books, we are increasingly feeling the bottlenecks in the global supply and logistics chains, particularly with regard to certain electronic components," said Hella CEO Rolf Breidenbach. "Due to pandemic-related production stoppages at some chip suppliers in Asia, the situation has become even worse in recent weeks. As a result, according to the latest forecasts, a significant decline in global vehicle production is to be expected."

Based on available forecasts from independent analysts, Hella expects global vehicle production to decline by more than 8% in Hella's current fiscal year 2021/2022 (June 1, 2021 to May 31, 2022). In July 2021, a growth of almost 4% was still expected.

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