Carmakers warn chip shortage putting brakes on recovery

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.

Microchips are essential for the electronics systems of modern cars, and have been in short supply since the end of last year.

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.

That left carmakers in a tight situation as demand returned, with many slowing or even temporarily halting production at factories.

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.

Jaguar Land Rover has warned the chip shortage could cut its third-quarter output by half.

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.

That is five percent of last year’s production level, or a third of the output increase that VW had expected earlier this year.

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

(AFP)

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