automotive industry

When the chips are down: Global shortage to keep crimping carmakers


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When the chips are down: Global shortage to keep crimping carmakers

BMW. The headquarters of luxury carmaker BMW is seen in Munich, Germany, July 24, 2020.

Michael Dalder/Reuters

Stellantis, the world's fourth largest carmaker, does not expect supply of semiconductor chips to improve before the fourth quarter of 2021

BMW and Stellantis became the latest major carmakers to warn on Tuesday, August 3, that the global semiconductor chip shortage that has bedeviled the industry this year will drag on throughout 2021 and beyond, hitting production and sales.

Carmakers, forced by the COVID-19 pandemic to shut down plants last year, face stiff competition from the sprawling consumer electronics industry for chip deliveries, hit by a series of supply chain disruptions during the pandemic.

Automobiles have become increasingly dependent on chips – for everything from computer management of engines for better fuel economy to driver-assistance features such as emergency braking.

Starved of chips, carmakers have focused production on higher-margin models, and have benefited from higher vehicle prices amid low inventories for consumers.

Stellantis chief financial officer Richard Palmer said on Tuesday the world’s fourth largest carmaker did not expect chip supply to improve before the fourth quarter, with a total projected production loss of around 1.4 million vehicles in 2021. Chief executive Carlos Tavares described the shortage as “the big gorilla in the room.”

BMW, which has so far been less affected by the chip shortage than some of its peers because of strong relations with its suppliers, also said the second half will be more challenging for the German luxury carmaker.

“The longer the supply bottlenecks last, the more tense the situation is likely to become,” BMW chief financial officer Nicolas Peter said in a statement. “We expect production restrictions to continue in the second half of the year and hence a corresponding impact on sales volumes.”

Speed bump

Other carmakers from Tesla to Ford Motor Company have warned that for the foreseeable future, a lack of chips is the main speed bump.

“While we’re making cars at full speed, the global chip shortage situation remains quite serious,” Tesla CEO Elon Musk said last week.

On Tuesday, General Motors Company shut down several North American plants because of the shortage, including three next week that make its highly profitable full-size pickup trucks. The No. 1 US automaker called the situation “complex and very fluid.”

German chipmaker Infineon Technologies also painted a grim picture on Tuesday, saying it was battling extreme tightness in its markets as the latest wave of COVID-19 disrupts production in Asia and inventories hit all-time lows.

“The rebound of global car markets continues to be hampered by acute supply limitations across the entire value chain,” Infineon CEO Reinhard Ploss told analysts. “All in all, it will take time to get back to a supply-demand equilibrium.”

“In our view, this will take until well into 2022,” Ploss added.

The Ifo economic research institute said on Tuesday that the German car industry and its suppliers faced the worst chip supply shortage in 30 years. A poll showed that 83% of companies were affected, up from 65% in April.

“This is leading to production stoppages,” Ifo researcher Oliver Falck said. “The shortages of semiconductors will persist for some time to come.”

On Sunday, August 1, French car lobby group CCFA-PFA said the global chip shortage and an upsurge in coronavirus infections would reduce the prospects of a strong rebound by the French car market. –

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