‘Really Big Concern’: Chip Shortage Could Persist Over Long Term, Automakers Fear

Thomas Catenacci on September 7, 2021

The global chip shortage that has caused supply shortages in the car industry and other sectors might slow down the economy for a longer period than expected, auto executives said.

“We are relatively weak because of semiconductor shortages,” Volkswagen CEO Herbert Diess told CNBC at the Munich Motor Show in Germany on Monday. “We are hit more in China than the rest of the world. That’s why we are losing market share.”

Diess added that chip shortages are a “really big concern,” according to CNBC.

The global shortage of semiconductors — the small internal component that is key for communications equipment, computing, wireless technology, industrial equipment and cars — was triggered at the beginning of the pandemic as companies shut down and people around the world began relying more on devices that need semiconductors, according to the Institute of Electrical and Electronics Engineers (IEEE). Car companies, which canceled orders at the beginning of the pandemic as the economy tanked, have been crushed by the chip shortage as they have ramped up production during the economy recovery.

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The auto industry represents about 9% of chip demand, according to the IEEE. Automakers purchase about $39.5 billion worth of semiconductors annually, a figure that will increase as electric cars become more common.

“We hope that in the fourth quarter that we will start coming back up again,” Ola Kallenius, the CEO of Mercedes-Benz parent company Daimler, told CNBC. “But there is a level of uncertainty that we have to deal with in our production system. It needs to stay flexible.”

Gunnar Herrmann, the chairman of Ford Europe’s management board, predicted that the shortage will persist through 2024, CNBC reported. He noted that, in addition to chips, there are shortages of many other raw materials such as plastics and steel.

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“It’s not only semiconductors,” Herrmann told CNBC. “You find shortages or constraints all over the place.”

The Ford executive predicted that car prices will continue to rise as the shortages persist and demand stays elevated, according to CNBC. Porsche CEO Oliver Blume said consumers are waiting six months or more for their cars as a result of production delays caused by supply shortfalls.

“We have the situation of the semiconductors and therefore the waiting time is longer than normal,” Blume told CNBC.

The average total price of a new vehicle hit a record of $42,736 in July, according to a Kelley Blue Book report. New car affordability simultaneously dipped to a 10-year low.

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Meanwhile, General Motors announced that it will halt production at eight of its North American plants, Axios reported on Tuesday. The company blamed the continued chip shortages.

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