Daily Management Review

Global Carmakers Continue To Be Hit By Covid-19 Induced Chip Shortage


Global Carmakers Continue To Be Hit By Covid-19 Induced Chip Shortage
The fact that the global auto industry is still strongly facing the impact of the ongoing semiconductor chip shortage with no immediate signs of a resolution was reflected in the grim warnings issued this week by major auto companies of the world including Toyota and Volkswagen.
Auto companies- and especially car makers, are facing severe competition from the surging demand for semiconductor chips from the consumer electronics industry resulting in a disruption of the global supply chain, following the auto companies being forced to shut down because of the Coviud-19 pandemic last year.
The latest acuteness in chip shortage has been caused by a surge of Covid-19 outbreaks in Asian countries such as Japan, Philippines, Thailand, Vietnam and Malaysia, where a large number of auto companies, as well as chip factories, are located. Production at the factories in these countries is being impacted by fresh restrictions to curb the spread of the pandemic.
Japan's Toyota had largely been able to avoid the impact of chip shortage and production curs primarily because of its policy of stockpiling chips that the company had adopted as a business strategy a decade ago since the 2011 earthquake and Fukushima nuclear disaster.
Bur on Thursday, a production cut of 40 per cent globally for the month of September, compared to its previously announced targets, was announced by Toyota, the world's largest automaker by sales volumes.  Production in 14 plants of the company in Japan and elsewhere, including most of its North American factories, would be temporarily curbed.
Semiconductors chips are used by cat makers for a variety of purposes, from computer management of engines for better fuel economy to power features like driver-assistance such as emergency braking.
Further changes in its production schedule could not be ruled by Germany's Volkswagen, the company said on Thursday.
"We currently expect supply of chips in the third quarter to be very volatile and tight," the No.2 volume carmaker behind Toyota said.
A similar announcement was made by the fourth largest auto maker of the world, Stellantis, as it announced halting of production at one of its factories in western France starting next week while also curbing output at another facility in the eastern part of the country.
Temporary production stoppage for its best-selling, profit-driving F-150 pickup truck at its Kansas City assembly plant will be done by United States based Ford Motor Co, the company had already said earlier this week.
A warning that the latest worsening of the chip shortage and the surge in outbreaks of the pandemic could potentially pose a "significant threat" to its sales performance over the next few months was issued by China's Geely Automobile Holdings Ltd.
"The situation does remain fluid," General Motors Co (GM.N) Chief Executive Mary Barra said on a conference call on August 4, noting the impact of events such as the current COVID-19 spike in Malaysia.