Covid fueled semiconductors crunch chips away at carmakers

In grim warnings, major carmakers including Toyota and Volkswagen offered fresh evidence that the auto industry remains firmly in the grip of an ongoing semiconductor chip shortage that shows no sign of abating.

After being forced to close plants in this pandemic took hold, carmakers are now facing stiff competition from the sprawling consumer electronics industry for chip deliveries amid global supply chain disruption. The latest snarl up comes as COVID-19 cases surge in Asian countries home to auto factories and chip plants such as Japan, Philippines, Thailand, Vietnam and Malaysia, leading to stricter curbs to prevent the spread of the virus. The world’s largest automaker by sales volumes said that it will slash global production for September by 40% from its previous plan, by affecting 14 plants in Japan and elsewhere.

Automobiles have become increasingly dependent on chips for everything from computer management of engines for better fuel economy to driver-assistance features such as emergency braking. Germany’s Volkswagen also said that it couldn’t rule out further changes to production and stated that they are currently expecting a supply of chips in the third quarter to be very volatile and tight. Ford Motor Co said this week it will temporarily shutter its Kansas City assembly plant where it builds its best-selling, profit-driving F-150 pickup truck, while China’s Geely Automobile Holdings Ltd warned the recent worsening of the chip shortage and resurgence of COVID-19 cases could pose a significant threat to its sales performance over the next few months.

Although Volkswagen said that it expected the situation to improve by the end of the year, some carmakers have warned the chip crisis will drag on into 2022 with earlier industry hopes of a quick resolution long since dashed. But even when one kink in the supply chain gets straightened out, others appear, making it difficult to ensure a consistent flow of chips and leaving damage-limitation focused automakers pushing available components to their more profitable models. General Motors Co Chief Executive Mary Barra said that the situation does remain fluid.