Global flea shortage: how it affects you

► VW warns that supply problems will continue until 2024
► Global chip shortage has strangled production
► Everything you need to know

A senior Volkswagen board member revealed that Wolfsburg expects the global chip shortage to continue for another two years. The group’s chief financial officer, Arno Antlitz, has warned that semiconductor supply will not return to normal until 2024, suggesting that long lead times, lack of choice in showrooms and odd prices on the new and used car market will affect the market longer than expected.

“We see a structural undersupply in 2022, which should only ease somewhat in the third or fourth quarter,” Antlitz told Boersen-Zeitung, a German newspaper. “The situation should improve in 2023, but the structural problem will not yet be completely resolved.”

Over the past two years the auto industry has had to deal with the uncertainty of Brexit, a global pandemic and war in Ukraine – but there is another crisis which has caused deep problems throughout of 2021-22: the global shortage of microchips. What started as an inconvenience for those looking to buy a PlayStation 5, Xbox or TV has now made its way to the automotive industry.

The lack of chips means automakers such as Jaguar Land Rover, the Renault-Nissan-Mitsubishi Alliance, Stellantis and the Volkswagen Group have all been hit by supply issues leading to temporary closures at many factories. Our latest roundup shows that the crisis shows no signs of abating, with some companies much more affected than others.

In the UK, new car sales are slowing as the supply of new cars dwindles and the waiting list grows. It’s no coincidence that used car sales are booming right now…

What is the semiconductor shortage and why is it happening?

The chip shortage is a three-pronged problem, although the two-pronged cause can be traced to the coronavirus. Like the auto industry, the semiconductor industry was forced to partially shut down due to the pandemic, leading to a lower than usual supply of chips.

And at the same time, the need for tech for working from home, along with the launch of two new games consoles – the PlayStation 5 and Xbox Series S/X – meant demand for these chips was higher than ever. . And yes, those consoles will have caused a stir – Sony estimates they sold 4.5 million units last year alone.

Finally, a fire at the Renesas Electronics factory – one of the largest manufacturers of semiconductors for the automotive industry – as well as a trade war and extreme weather conditions in Texas did not help matters either. .

How bad is it?

Cars are now all so technologically advanced that the crisis affects almost all manufacturers. Global industry consultancy AlixPartners has predicted the shortage will cost automakers $61bn (£44bn) in lost revenue in 2021, but adjusted that up to $110bn (£80bn). billion pounds).

We’ve tracked the effect on global car manufacturing groups and collated some of the production impacts in our handy guide below.

Chip shortages hit consumer electronics — and cars

Mercedes-Benz parent company Daimler has cut working hours by up to 18,500 people at its plants in Bremen and Rastatt, leading to a halt in production between April 23 and 30. But it’s a situation that will affect Mercedes-Benz for months to come. The company had to cut production in 2021, and that could continue into 2022. Chief executive Ola Källenius told Reuters: “Improving supply visibility is a top priority for us, and the Shortage of chips is a fixable problem.” Mercedes-Benz has a problem with the vehicles it has built but is still waiting for their chipsets so they can be completed. Källenius added: “We have unfinished cars, but we didn’t let that ball out of proportion. Orders for the S-Class are very healthy, but supply chain issues are holding us back.

Ford’s component factories in the UK were affected and its Otosan plant in Turkey was closed as a result. Earlier in 2021, the company announced that it would produce 1.1 million fewer vehicles than expected. As the FT reported, the company was forecasting a 200,000 to 400,000 shortfall for the second quarter, but shrewd management made the most of it. Second quarter 2021 profits fell 50% to $561m (£481m), and that was directly due to the global chip shortage. The Blue Oval is more optimistic about the year’s production. “We really looked at allocating chips to our higher-profit vehicles,” said John Lawler, Ford’s chief financial officer. “Prices have remained very strong, much higher than we expected.”

JaguarLand Rover
Jaguar Land Rover saw production seriously slowed in 2021. In the spring, it issued a statement confirming that “we have adjusted the production schedules for certain vehicles, which means that our Castle Bromwich and Halewood manufacturing plants will operate for a limited period of out of production from Monday, April 26. We are working closely with affected suppliers to resolve issues and minimize the impact on customer orders where possible. The company has set up a damage limitation task force from the chip shortage, which it describes as a “full-time mission control center” to manage the problem, chief financial officer Adrian Mardell confirmed. Additionally, and dealing more directly with third-party suppliers, JLR prioritizes the production of its most cost-effective models. Unlike many of its rivals, Jaguar Land Rover believes the global chip shortage will begin to ease in the second half of 2021.

Renault-Nissan-Mitsubishi Alliance

Renault’s chief financial officer, Clotilde Delbos, initially told the FT in early 2021: “We don’t want to give estimates very quickly which could be wrong. Two months ago we said we thought the peak would be in the second quarter, but we think there will be a lingering effect in the third quarter, if not longer. Visibility deteriorates. Renault later raised its August 2021 estimate for the loss of car production, blaming supplies for the global chip shortage, but adding that rising material prices are also seriously affecting profitability. The company estimates that the situation could lead to the loss of production of 200,000 vehicles in 2021, and does not exclude that it could affect production in 2022.


Stellantis, the supergroup that includes Citroen, Peugeot, Jeep and Chrysler, has also been hit by the chip shortage – and has even started replacing parts on some models to get around it. The group revealed that it had replaced the digital speedos on the new 308s with traditional analogue units, although the change was only applied to vehicles arriving in May. But as Reuters reported, Stellantis CEO Carlos Tavares confirmed the situation would drag on. He said: “The semiconductor crisis, from all I see and I’m not sure I can see everything, is going to drag on easily into 2022 because I don’t see enough signs that a Additional production from Asian supply points will come west in the near future.Tavares added that Stellantis will prioritize its chip supplies for the most profitable cars.

You’re here
Tesla was initially hit by the chip shortage, with CEO Elon Musk describing the first quarter of 2021 as having “some of the toughest supply challenges we’ve ever faced.” But the automotive maverick flew in the face of the rest of the industry by successfully reversing the situation. Model 3 sales are stronger than ever. “Supply chain challenges, particularly global semiconductor shortages and port congestion, continued to be present in the second quarter,” a company statement said. “The Tesla team, including supply chain, software development and our factories, has worked extremely hard to keep production as close to full capacity as possible.” And the result is that Tesla’s quarterly profits topped $1 billion for the first time. The company said it was able to increase operating profit primarily by increasing volume and reducing costs. However, revised Model S sales won’t start in the UK until 2022 as the company focuses on the Model 3.

Like Tesla, Toyota is weathering the storm very well. The company posted record sales in June as production was unaffected by the global chip shortage. Toyota has plentiful semiconductor inventories and expects no issues for the rest of 2021.

Volkswagen Group
At his annual press conference earlier in 2021, CEO Herbert Diess revealed that the Volkswagen Group was unable to build 100,000 cars due to chip shortages in 2020 – and that number wouldn’t be either. more recovered in 2021. A few weeks later, the VW boss described the automaker as being in “crisis mode” and predicted that the shortage of semiconductors would have a serious impact on profits in the second quarter of 2021. More flesh on the bones of the crisis was added in a statement, stating that “the depreciation due to the shortage of semiconductors has shifted and will more likely lead to depreciations in the second half of the year. In other words, the shortages will continue through 2021 and will likely impact sales well into 2022.

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