The microchip crisis is starting to pass: what car manufacturers say, what happens to production

After almost two years of missing chips, car manufacturers get enough semiconductors to produce at full capacity.

The global shortage of semiconductors that has plagued the car industry for almost two years is showing signs of easing, at least for now.

Mercedes Benz, Daimler Truck Holding and BMW are among the carmakers now getting enough high-tech components to produce at full capacity after months of paralyzing disruptions.

The breakthrough comes earlier than companies have predicted and marks a bright spot for an industry facing a deteriorating economy and inflation, while managing a historic transition to electric vehicle production.

Manufacturers applaud the improved supply of chips, but have not yet declared victory.

Manufacturers do not risk

“We still monitor it weekly, but so far we’ve had virtually no production problems worldwide,” said Joerg Burzer, head of production and supply chain management at Mercedes. Supply problems appear “here and there,” he said, “but nothing compared to what it was last year.”

Even though the demand for cars has increased, car manufacturers have had to reduce production because factories globally have not been able to afford enough essential chips for increasingly computerized vehicles.

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The disruptions were so severe that global passenger car production barely showed signs of pre-pandemic levels.

As chip supply improves, carmakers are reducing their remaining orders and concerns are mounting over how consumer demand will withstand accelerating inflation and higher interest rates.

Tesla CEO Elon Musk said the carmaker must cut staff by 10 percent and has a “very bad feeling” about the economy, according to Reuters, which quoted an internal note.

Not everyone is as pessimistic as Musk

German carmakers’ sentiment improved significantly in May, according to an Ifo Institute survey. The survey showed growing confidence among carmakers that they will be able to raise prices to cope with rising raw material costs.

Part of the new availability of chips comes from a weakening economic outlook and inflation, which has reduced the demand for consumer electronics that use components as well.

Karin Radstrom, head of the Daimler Truck Mercedes brand, said the company is now getting the chips it needs to reduce the number of delayed orders.

“It’s not perfect, but it’s better than last year,” Radstrom said in an interview. “I try not to celebrate too early. We will continue to monitor the situation closely. “

BMW has expressed similar reserved optimism, saying that all factories are up and running and that the company is not facing any shutdowns due to the supply of chips.

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“Currently, the situation is a little more stable,” said a spokesman, adding that BMW still monitors the supply of chips on a daily basis and does not rule out the possibility of further disruptions in the coming weeks and months.

The car industry is starting to recover

The Volkswagen Group, which, like others, has estimated that the blockade will begin to ease in the second half of 2022, is also recording steady deliveries, according to a spokesman, who stressed that there is still significant uncertainty. regarding the coming months.

Harry Wolters, president of Paccar’s DAF Trucks, saw the same trend.

“We’ve seen a better supply of components than we probably anticipated five, six weeks ago,” Wolters said. “So in the US and Europe, we’ve been able to increase construction rates.”

But not all companies enjoy the same relief. Volvo Trucks said it still has limited chip availability and expects a second-quarter impact on production.

And according to Susquehanna Financial Group’s research, chip delivery times – used in a range of electronics – remained unchanged in May, a sign that the gap persists.

Mercedes CEO Ola Kallenius said last year his company would use more expensive semiconductors to avoid the deficit. Ford Motor CEO Jim Farley said last month that the company would buy chips wherever it could on the open market.

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