Chip shortages could sluggish automotive production, VW and suppliers say

BEIJING/FRANKFURT/SAN FRANCISCO (Reuters) – A scarcity of chips applied in automobile manufacturing could disrupt automotive manufacturing in China effectively into future calendar year, industry officials stated Friday, with chip providers saying they are elevating selling prices and expanding their creation in response.

Automobiles have turn out to be increasingly dependent on chips – a lot of of them produced in Europe – for all the things from pc administration of engines for greater gasoline economic system to driver-assistance characteristics these as unexpected emergency braking.

Automotive creation slowed in early 2020 due to the fact of challenging lockdowns prompted by the COVID-19 pandemic but has occur roaring again, in particular in China, as consumers search to journey in private motor vehicles relatively than take community transportation.

German car suppliers Continental, Bosch and Volkswagen, the world’s most significant carmaker, warned about the lack of semiconductor elements.

“Although semiconductor suppliers have by now responded to the surprising desire with capacity expansions, the needed more volumes will only be accessible in six to nine months,” Continental claimed on Friday. “Therefore, the potential supply bottlenecks might last into 2021.”

Germany’s Infineon Technologies AG explained it was rising its investments to ramp up a new chip factory in Austria.

“We have now factored in selected growth for motor vehicle manufacturing in 2021. Accordingly, we will adjust our international producing capacities,” the enterprise explained in a statement.

Dutch automotive chip supplier NXP Semiconductors has advised prospects that it need to raise charges on all products and solutions for the reason that it is facing a “significant increase” in elements expenses and a “severe shortage” of chips, a letter to buyers viewed by Reuters confirmed.

“To handle the unexpected boost in fees from our suppliers, we reluctantly have to elevate pricing on all solutions,” the Nov. 26 letter to customers claimed. NXP confirmed the authenticity of the letter but declined to comment further.

Volkswagen, the biggest overseas automaker in China, stated on Friday that China’s over-all vehicle output could be interrupted just after the COVID-19 pandemic disrupted chip provides globally for some digital elements.

“The chip offer for sure automotive electronic factors has been impacted owing to uncertainties brought about by the pandemic,” a Volkswagen representative told Reuters in an emailed statement.

“This has led to a opportunity interruption in automotive creation, with the scenario finding additional important as demand from customers has risen owing to the full-velocity recovery of the Chinese market,” the assertion, which refers to China’s overall vehicle creation and not particularly Volkswagen’s, explained.

Germany-centered auto supplier Bosch said it as well was observing supply chain bottlenecks for particular parts.

“No provider can elude this sector enhancement. We are in close speak to with our suppliers and clients to sustain the supply chains as significantly as attainable regardless of the tense market place predicament,” Bosch claimed.

Just one senior sector formal, who declined to be named, told Reuters that he predicted the scarcity of chips will continue on to effect China’s car or truck output for a when and a number of intercontinental and area car or truck companies will encounter production interruptions in the limited-phrase but at unique degrees.

China is envisioned to offer additional than 22 million motor vehicles in the first 11 months of 2020, down just 3% from the exact same time period a yr earlier.

Volkswagen also explained it was closely checking the condition and had by now began coordinating with suppliers to consider ideal countermeasures.

The Wolfsburg-dependent business has community joint ventures with SAIC Motor Corp Ltd, China FAW Group Corp Ltd and Anhui Jianghuai Automobile Group Corp Ltd (JAC).