It is becoming increasingly clear how big the chip shortage is for the car industry

After a bad corona year, the sun shone again for car manufacturers at the beginning of 2021. The lockdowns seemed to be coming to an end and hoarded money from consumers was looking for a destination. The result: a huge boost for car sales. However, that momentum was shattered as it became clear that increased demand would pose a problem for the industry. An acute chip shortage.

Also read: The car industry hoards chips as if they were toilet rolls

On Tuesday, Stellantis (Fiat, Peugeot) and BMW were the next major automakers to join the list of carmakers that warned of a shortage of semiconductor chips and its consequences in the second half of the year. “The longer the supply bottlenecks last, the more tense the situation will become,” said BMW chief executive Nicolas Peter.

A modern car can contain more than a thousand chips. They arrange everything. From engine management and parking assistance to brake sensors and navigation applications.

The demand for new cars, and therefore new chips, came at a time when the chip industry was actually already over-demanded. The home-sitter needed a distraction. This generated great interest in all kinds of consumer electronics and related products: from new laptops and game computers to servers for data centers.

It also happened at a time when several chip production sites were dealing with setbacks such as severe weather and a prolonged power outage. So where demand increased, supply fell.

Steeds more problematic

In recent weeks it has become clear how big the chip shortage for the car industry is now. In June, the United Kingdom had the second worst car production since 1953: 69,000 units. Only in June 2020, when production was at its lowest point due to the corona crisis, were even fewer cars produced: 56,500.

In the Netherlands, 26,883 passenger cars were registered in July. That was more than 22 percent less than a year ago. Due to a good start to the year, the figures for the first seven months are not that bad. Almost 190,000 cars were registered – 1.5 percent less than in the same period in 2020.

Also read: The trump card of Stellantis in electric driving is scale

That affects car manufacturers. Such as the new merger company between the French car group PSA (Peugeot, Citroën) and the American FCA (Fiat, Chrysler, Alfa Romeo). Chief Financial Officer Richard Palmer said Tuesday he expected the deficit to continue until at least the fourth quarter. As a result, the company will not be able to produce 1.4 million cars that were budgeted for 2021.

The shortage of chips could last well into 2022

BMW CEO Nicolas Peter also said he would take into account the consequences for his company. Earlier, car manufacturer VDL Nedcar had to shut down production for days in May due to a shortage of electronic parts. The largest Dutch car manufacturer builds several models of the Mini and the BMW X1 for BMW. CEO Peter: “We expect production restrictions to continue in the second half of the year and therefore have a corresponding impact on sales volumes.” Tesla CEO Elon Musk called the problem “pretty serious” last week.

German chipmaker Infineon Technologies warned on Tuesday that the shortage could last until “well into 2022”. The latest wave of corona cases is currently hampering production in Asia. “The recovery of global auto markets continues to be hampered by acute supply constraints across the value chain,” Infineon chief executive Reinhard Ploss told analysts. “All in all, it will take time to re-establish a balance between supply and demand.”

Results still good

The half-year results did not show on Tuesday that the chip shortages appear to be an increasing problem for the industry. For example, Stellantis reported a net profit of 5.9 billion euros compared to a loss of 813 million euros in the first six months of 2020. This was partly due to the cost savings associated with the merger, which yielded 1.3 billion euros in the first half. .

German BMW benefited from increased interest in luxury cars. They have a higher profit margin than regular passenger cars. As a result, BMW achieved a net profit of 4.8 billion euros, compared to a loss of 212 million euros in the second quarter of 2020.

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