Semiconductor shortage hits carmakers hard this festive season

Carmakers are looking at a gloomy festive season as global shortage of semiconductors, for almost a year now, has hit the automobile industry hard. With the situation further worsening over the past few months, the industry has nearly come to a standstill.

Maruti Suzuki says its factory output in October could be down by as much as 40%, yet another month of short supplies after cutting output by nearly 60% last month. “Owing to a supply constraint of electronic components due to the chip shortage situation, the company is expecting an adverse impact on vehicle production in October,” the carmaker said in a filing. Maruti Suzuki’s domestic passenger vehicles output was at 63,111 units in September against 1.5 lakh units in the same month last year.

Honda, like its global peers, has also been affected and is struggling to ramp up car production due to a shortage of chips, exacerbated by a fire at Renesas Electronic Corp’s 6723.T chip plant in Japan and blackouts in Texas, where a number of chipmakers have factories. Nissan and Toyota have also reduced their production. Toyota, the world’s biggest carmaker, had planned to make almost 900,000 cars in September, but had to reduce it to 540,000 vehicles.

German firm Volkswagen told Reuters they expect supply of chips in the third quarter to be very volatile and tight. General Motors (GM), Ford, Nissan, Daimler, BMW and Renault have already scaled back production.

Executives at the IAA Munich auto show said the shortage of chips could take until 2023 to be resolved. Daimler CEO Ola Kallenius said soaring demand for semiconductors means the auto industry could struggle to source enough of them throughout next year and into 2023, though the shortage should be less severe by then. “Several chip suppliers have been referring to structural problems with demand. This could influence 2022 and the situation may be more relaxed in 2023.”

Oliver Zipse, BMW CEO, expects supply chains to remain tight well into 2022. “I expect that the general tightness of the supply chains will continue in the next six to 12 months.” He said he saw no issues in the long-term as the automotive industry was an attractive client for chipmakers.

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The COVID-19 pandemic forced automakers to shut down plants in 2020, face stiff competition from the sprawling consumer electronics industry for chip deliveries, which have been upended by a series of supply chain disruptions.