Volkswagen and Toyota face production cuts due to lack of chips | Auto industry

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Volkswagen and Toyota have become the latest automakers to warn of production cuts due to a global shortage of computer chips.

German carmaker Volkswagen said a semiconductor supply crunch could force it to slow production lines during the fall, adding to cuts that have been in place since February. Japan’s Toyota also said it will cut production by 40% in September.

Automakers struggled after a recovery in demand strained supply chains earlier this year, as the Covid-19 outbreak across Asia led to chip production and operations at commercial ports.

“We currently expect chip supply in the third quarter to be very volatile and tight,” said Volkswagen, the second-largest automaker after Toyota.

“We cannot rule out other changes in production,” the company told Reuters.

The Wolfsburg-based carmaker said it expects the situation to improve by the end of the year and aims to make up for the production shortfall in the second half as much as possible.

New car prices have started to rise in response to limited supplies of cars, but the most visible impact has been on the used car market, with prices jumping 14% year-on-year in the UK and more than 40% in the US. .

Toyota said it plans to cut global production for September by 40% compared to its previous plan, according to the Nikkei Business daily. This sent its shares down 4.4% on Thursday.

Shares in European automakers and suppliers were also broadly weaker, with BMW, Daimler, Renault, Volkswagen and Stellantis — maker of Peugeot and Fiat — all down more than 2%.

The recent production problems come on the heels of news that German chip maker Infineon, the largest car supplier, was forced to suspend production at one of its factories in Malaysia in June, due to the coronavirus outbreak.

Reinhard Bloss, CEO of Infineon, said earlier this month that the auto industry faces “severe supply constraints across the entire value chain” and it will take until 2022 for supply and demand to be rebalanced.

Analysts at ING said that some Taiwanese semiconductor companies that have not been affected by the delta type of Covid-19 are pushing production beyond the usual 100% to meet demand.

Ford said Wednesday it will halt production for a week on production lines that make its best-selling F-150 pickup trucks due to shortages. Closing will start on Monday.

Earlier this month, General Motors halted production for a week at three North American truck plants, while Nissan halted production for two weeks at a Tennessee plant due to the Covid-19 outbreak at a chip plant in Malaysia.

Phone and computer makers have also reported shortages of semiconductors. Apple executives said that while the impact was less severe than feared in the third quarter, it will only get worse in the current quarter, and could affect iPhone production.

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This is the impact on the US auto industry and the threat to jobs, as it emerged that three Democratic senators have asked the Taiwanese government to provide additional support to chip makers.

The letter, dated August 18 and previously unannounced, was sent by Gary Peters and Debbie Stabeno, senators from Michigan, and Sherrod Brown of Ohio to Taiwan’s de facto ambassador to Washington, Hsiao Pei-Khim, praising her efforts in addressing loss”.

The senators said: “Demand for vehicles — from cars to commercial trucks — is on the rise now, yet a shortage of semiconductor chips is preventing this renewed demand from responding. While our manufacturers have to add extra work shifts, they have had to stop Run American factories or reduce production. The United States is now the most affected region in the world.”

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