VW, Ford, Daimler worry chip scarcity might persist for a while

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A General Motors assembly worker works at the GM Romulus Powertrain facility in Romulus, Michigan, assembling a V6 engine that is used in a variety of GM cars, trucks, and crossovers.

Rebecca Cook | Reuters

Automakers like Ford, Volkswagen, and Daimler are still grappling with the impact of global chip scarcity, with executives warning each of the companies that a silicon shortage is likely to remain a problem.

Volkswagen CEO Herbert Diess, Daimler CEO Ola Kallenius and Ford Europe CEO Gunnar Herrmann told CNBC’s Annette Weisbach on Monday at the Munich Motor Show that it is difficult to say when the complex problem will be solved.

Germany’s Volkswagen, Europe’s largest car manufacturer, has lost market share in China due to the chip shortage, said Diess.

“We are relatively weak because of semiconductor shortages,” he said. “In China we are more affected than the rest of the world. That is why we are losing market share.”

Diess said his colleagues in China had pushed for more semiconductors and called the shortage of chips a “really big concern”.

The Wolfsburg-based company expected an improvement in the semiconductor situation after the summer vacation, but that was not the case. Malaysia, where many of Volkswagen’s suppliers are based, has been hit hard by the coronavirus in recent weeks, which has led to several plant closings.

Diess said he believes chip scarcity issues will gradually resolve as countries reduce Covid-19 transmission, but he anticipates there will be a generalized semiconductor shortage for some time. “We will face a general shortage of semiconductors because the Internet of Things is growing so fast that there will be constraints that we are trying to address,” he said.

Commodity crisis

Ford Europe’s Herrmann, meanwhile, estimates the chip shortage could last until 2024, adding that it’s difficult to say exactly when it will end.

The shortage is said to have been exacerbated by the switch to electric vehicles. For example, a Ford Focus typically uses around 300 chips, while one of Ford’s new electric vehicles can have up to 3,000 chips.

Aside from chips, there are now other bottlenecks to contend with. Ford is facing a “new raw material crisis,” said Herrmann.

“It’s not just semiconductors,” he said, adding that lithium, plastics, and steel are relatively scarce. “You find bottlenecks or restrictions everywhere.”

Car prices will rise with rising raw material prices, said Herrmann.

Despite the imbalances, Herrmann said the order intake from Ford Europe was “fantastic” and “the demand is indeed extremely strong”.

No longer functional

Kallenius from Daimler hopes that the third quarter will be the “low point” of the disruptions. “That seems to be the quarter that will be hardest hit,” he said.

“We hope to get promoted again in the fourth quarter,” said Kallenius. “But there is a certain uncertainty that we have to deal with in our production system. It has to remain flexible.”

The chip shortage has affected the automotive industry like no other. Assembly lines have been shut down and some cars are now shipped without functions based on semiconductors.

Porsche, Skoda and Seat

The CEOs of Porsche, Skoda and Seat said on Tuesday that they are also feeling the pinch in semiconductors.

Porsche boss Oliver Blume told CNBC that the chip squeeze is causing delays in the production line and he hopes the problem will be resolved soon. “We have the semiconductor situation and therefore the waiting time is longer than normal,” said Blume, adding that some customers would wait half a year or more.

Thomas Schafer, CEO of Skoda, told CNBC that Skoda was “hugely affected” by the closure of the semiconductor factory in Malaysia. “Once that is done, hopefully in the next 4-5 weeks, there is also another fundamental shortage that is likely to last through 2022,” he said.

Wayne Griffiths, CEO of Seat, told CNBC that semiconductor shortages are currently a challenge for all brands. “We are prioritizing our Cupra models and our electric cars with the semiconductors that we need to try to ensure that delivery times remain acceptable there,” said Griffiths.