- Car companies are struggling to keep up with demand as chip shortages are still causing them to reduce outputs around the world.
- Since the start of this year, Ford has been suspending and cutting production at several plants due to the shortage, making the current quarter its low point for vehicle production.
- In Germany, Volkswagen plans to cut nearly all night shifts at its main plant as Europe’s largest automaker continues to battle the chip crisis.
- Toyota expects to lose between 100,000 and 200,000 units of output in March, after losing 140,000 units in January due to chip bottlenecks.
It has been almost two years since the chip shortages became a global stumbling block and while we would have guessed that situation may have subsided by now–it hasn’t. Not entirely at least. Car manufacturers including Ford, Volkswagen and Toyota are still struggling to deal with the impact of the semiconductor shortage, with each of the companies still cutting output for the first quarter of this year.
The disruption could not come at a worse time especially considering how demand for cars has bounced back strongly from the pandemic slump. Unfortunately, the supply of semiconductors is depriving some carmakers of a chance to make up sales they lost.
For starters, Toyota, the world’s largest automaker, believes it could lose up to 480,000 vehicles of output from January through March this year. The company once again downgraded its global sales and production outlooks last week after operating profit tumbled 21% in the latest quarter.
Now, Toyota’s global consolidated sales forecast is 8.25 million vehicles for the current fiscal year ending March 31, from an earlier outlook of 8.55 million vehicles. After losing 140,000 units in January due to supply chain bottlenecks, the Japanese automaker expects to lose between 100,000 and 200,000 units of output in March due to the lingering semiconductor shortages.
A Toyota executive, after the automaker announced financial results last Wednesday said, “We do not think this imbalance between microchip demand and supply will improve anytime soon, and coupled with coronavirus outbreaks, the outlook still remains unclear.” The executive also noted that Toyota is reviewing production plans on a “daily basis”.
Even its closest rival, Volkswagen, expects 2022 to be another year to struggle with chip shortages. Chief Financial Officer Arno Antlitz in fact has only a few reasons to be optimistic in the short-term on this front. In a recent interview with the Wall Street Journal, Antlitz explained that the global chip inventory will continue to remain extremely constrained, though some signs of improvements could be recorded towards the end of the year.
According to him, Volkswagen had mitigated the impact of raw-material and component price increases through rigorous cost-cutting and that higher prices weren’t yet translating into higher wages at the company. He, however, expected the rate of inflation to eventually ease later this year, but added that the company would continue to struggle with a tight supply of chips throughout the year.
There were also reports circulating last year indicating that the German automaker is preparing for the possibility that the chip shortage could last until at least early 2023. It indicated that in the worst-case scenario, deliveries by Volkswagen could fall to eight million cars this year. Although the automaker declined to comment on the report, it did say it expected a slight easing of the supply situation in 2022 but that the first half of the year would remain very volatile.
Besides Toyota and Volkswagen, US automaker Ford Motor Co too is struggling to keep up with demand due to the lack of chip supply for its vehicles. Just last week, the automaker suspended or cut production at eight plants in North America due to the shortage. Ford did mention that the current quarter would be its low point for vehicle production due to the chip shortage.
Yesterday, as per Reuters report, the automaker said it will continue idling some of its assembly plants for this week due to the global semiconductor shortage. S&P Global Platts Analytics has projected that the shortage hindering global vehicle production is poised to persist into 2022 before supply catches up with demand in early 2023.
22 March 2023
21 March 2023