Automakers feel chip crisis easing as global growth slows

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By Joshua Gallu

The global semiconductor shortage that has plagued the auto industry for nearly two years is showing signs of easing, at least for now.

Mercedes Benz AG, Daimler Truck Holding AG and BMW AG are among automakers now getting enough high-tech components to produce at full capacity after experiencing crippling breakdowns for months.

The breakthrough comes sooner than expected by companies and marks a bright spot for an industry battling a deteriorating economy and inflation while managing a historic shift to electric vehicle production. Manufacturers applaud the improved chip supply but are yet to declare victory.

“We’re still monitoring it week to week, but so far virtually worldwide we haven’t had any production issues,” said Joerg Burzer, head of production and chain management. supply at Mercedes. Supply issues are happening “here and there”, he said, “but nothing compared to what it was last year”.

Read also | Global chip shortage set to last until 2023: US official

Even as demand for cars soared, automakers had to cut production as factories around the world couldn’t source enough of the chips essential for increasingly computerized vehicles. The outages have been so severe that global passenger car production has barely shown signs of recovering to pre-pandemic levels.

As chip supply improves, automakers are shrinking their order books and concerns are turning to how consumer demand will hold up amid accelerating inflation and higher interest rates. Tesla Inc. CEO Elon Musk said the electric car maker needed to cut its workforce by 10% and had a “very bad feeling” about the economy, according to Reuters, which cited a Internal memo.

But not everyone is as pessimistic as Musk. Sentiment among German automakers improved markedly in May, according to a survey by the Ifo Institute. The survey showed growing confidence among automakers that they will be able to raise prices to meet soaring raw material costs.

Some of the new chip availability stems from the weakening economic outlook and inflation, which has reduced demand for consumer electronics that also use the components. Karin Radstrom, Mercedes brand manager of Daimler Truck, said the company was now getting the chips it needed to reduce a backlog of orders.

“It’s not perfect, but it’s better than last year,” Radstrom said in an interview. “I try not to celebrate too soon. We are still monitoring the situation closely. »

Read | How supply chain issues could hold back the electric vehicle revolution

BMW expressed similar reserved optimism, saying all factories are operational and the company is experiencing no shutdowns due to chip supply.

“Currently the situation is a bit more stable,” a spokesperson said, adding that BMW was still monitoring chip supply on a daily basis and not ruling out the possibility of further disruptions in the coming weeks and months.

Volkswagen AG, which like others estimated the impasse would begin to ease in the second half of 2022, is also experiencing stable supplies, according to a spokesperson, who stressed there was still great uncertainty about the months to come.

Harry Wolters, president of the DAF Trucks unit of Paccar Inc., has seen the same trend.

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


But not all businesses get the same relief. Volvo Trucks said chip availability was still limited and expects an impact on second-quarter production. And according to research from Susquehanna Financial Group, delivery times for chips – used in a range of electronic devices – held steady in May, a sign that delays are continuing.

Mercedes CEO Ola Kallenius said last year that his company would resort to using a more expensive semiconductor to avoid the shortage. Ford Motor Co. CEO Jim Farley said last month that the company would buy chips wherever it could on the open market.

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