Carmakers warn chip shortage putting brakes on recovery

Microchips are essential for the electronic systems in modern cars, and shortages have held back automakers as they seek to recover from the Covid-19 pandemic

Microchips are essential for the electronic systems in modern cars, and shortages have held back automakers as they seek to recover from the Covid-19 pandemic

The automobile industry is being hit hard by a shortage of computer chips that has slowed production and is set to drag on for months.

Carmakers and suppliers have turned in strong results that beat expectations for the first half of the year, but they warned that a lack of semiconductors had crimped production.

The situation is to some extent the fault of carmakers, who scaled back orders when the pandemic hit, so chipmakers shifted output to consumer electronics, which was seeing a boom in demand as people splurged on equipment to work and relax and home.

While automakers and analysts were initially confident the impact would be short-lived and limited, they now see it as lasting through the rest of the year and the impact as more significant.

The Volkswagen Group said the impact was likely to be "more pronounced" in the third quarter as it lowered its annual production forecast by roughly 450,000 vehicles.

"The risk of bottlenecks and disruption in the supply of semiconductor components has intensified throughout the industry," the German automaker said.

VW said one way it was coping with the shortage was by favouring high-end vehicles, which bring in more money.

Ford said its average sale price rose by 14 percent from last year as it surprised analysts with a $1.1 billion second-quarter profit.

But the worst may already be behind the automakers, according to one analyst.

"The situation will improve as new production capacity becomes available, but the problem won't be over by the end of 2021 and could continue until 2023," Dudenhoeffer told AFP.

Consumers are likely to notice longer delays and higher prices as dealers have worked through their stocks and manufacturers offer fewer promotions. 

Automotive supplier Valeo, which uses chips in its driving assistance and automatic lighting systems, says it has so far escaped a halt in production.

- Chained up -

The crisis appears to be provoking manufacturers to reevaluate this practice, dubbed "just in time".

But as automakers overcome the chip shortage another problem awaits, Dudenhoeffer warned.

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