Volkswagen and Toyota face production cuts due to chip shortage
World’s largest car maker will slash output by 40% in September as Covid-19 outbreaks hit semiconductor supplies
Last modified on Thu 19 Aug 2021 11.00 EDT
Volkswagen and Toyota have become the latest car makers to warn about production cuts because of the global computer chip shortage.
German car manufacturer Volkswagen said a semiconductor supply crunch could force it to slow production lines during the autumn, adding to cuts that have been in place since February. Japanese firm Toyota also reported that it would slash output by 40% in September.
Car makers have struggled after a recovery in demand stretched supply chains earlier this year, with Covid-19 outbreaks across Asia hitting both chip production and operations at commercial ports.
“We currently expect supply of chips in the third quarter to be very volatile and tight,” said Volkswagen, the second largest car maker behind Toyota.
“We can’t rule out further changes to production,” the company told the Reuters news agency.
The Wolfsburg-based car maker said it expected the situation would improve by the end of the year, and aimed to make up for production shortfalls in the second half as far as possible.
New car prices have begun to rise in response to the limited supplies of cars, but the most noticeable impact has been on the secondhand car market, where prices have jumped by 14% year-on-year in the UK and more than 40% in the US.
Toyota said it intended to reduce global production for September by 40% compared to its previous plan, according to the Nikkei business daily. This pushed its shares down by 4.4% on Thursday.
Shares in European car makers and suppliers were also broadly weaker, with BMW, Daimler, Renault, Volkswagen and Stellantis – the maker of Peugeot and Fiat cars – all down by more than 2%.
The latest production woes follow news that German chipmaker Infineon, the top automotive supplier, was forced to suspend production at one of its plants in Malaysia in June, due to a coronavirus outbreak.
Reinhard Ploss, the Infineon chief executive, said earlier this month that the automotive industry faced “acute supply limitations across the entire value chain” and it would take until well into 2022 for supply and demand to be brought back into balance.
Analysts at ING said some Taiwanese semiconductor companies unaffected by the Delta variant of Covid-19 were pushing production beyond the usual 100% to satisfy demand.
Ford said on Wednesday that it would halt output for a week on production lines that build its best-selling F-150 pickup trucks because of the shortage. The shutdown will begin on Monday.
Earlier this month, General Motors suspended production for a week at three North American truck plants, while Nissan halted it for two weeks at a major Tennessee plant because of a Covid-19 outbreak at a chip plant in Malaysia.
Phone and computer makers have also reported semiconductor shortages. Apple executives said that while the impact was less severe than feared in the third quarter, it will get worse in the current quarter, and could hit iPhone production.
Such is the impact on the US car industry and the threat to jobs, it has emerged that three Democratic senators asked the Taiwanese government to give extra support to chip makers.
The letter, dated 18 August and not previously made public, was sent by Gary Peters and Debbie Stabenow, the senators from Michigan, and Ohio’s Sherrod Brown to Taiwan’s de facto ambassador in Washington, Hsiao Bi-khim, praising her “efforts to address the shortage”.
The senators said: “Demand for vehicles – from cars to commercial trucks – is now up, yet the lack of semiconductor chips is preventing this renewed demand from being met. At a time when our manufacturers should be adding extra shifts, they have had to idle US plants or curtail production. The US is now the most impacted region in the world.”
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