Volkswagen and Stellantis suffer financial blow due to chip shortage | Automobile industry

Automakers Volkswagen and Stellantis suffered financial difficulties in the third quarter of 2021 as the auto industry continued to grapple with the global computer chip shortage caused by the disruption of the coronavirus pandemic.

The operating profits of VW, the world’s largest automaker by production, fell by 500 million euros (£ 420 million) in the third quarter of 2021. It made 2.8 billion euros before exceptional items between July and September, against 3.2 billion euros at the same time. period last year.

Stellantis, which was formed from a merger of Fiat and Peugeot in January, reported a 14% drop in revenue as it produced 600,000 fewer vehicles than expected due to the chip shortage.

Automakers around the world have been hit hard by the continuing shortage of computer chips, made from semiconductor materials. As the extent of the pandemic became clear in early 2020, automakers slashed orders for chipmakers, only to find themselves at the back of the pack when demand roared.

More computer chips than ever are used in cars to control everything from engines and door locks to autonomous driving capabilities. The problem is particularly acute among automakers such as VW, which are pushing hard on electric cars, which require even more chips to control lithium-ion batteries.

VW said its higher-volume brands, including Volkswagen, Skoda and Seat, were the most affected, with particularly acute shortages in China.

In the first nine months of 2021, VW was only able to increase deliveries by 6.9% to 7 million vehicles, even compared to 2020, when lockdowns around the world shut down factories and dragged sales down. .

Automakers have warned that the shortages will last until at least 2022, and some experts believe it will affect the industry until 2023 as semiconductor companies rush to build complex new foundries. Richard Palmer, CEO of Stellantis, said there was “continued poor visibility of component supply.”

He said: “The level of chip shortage was probably slightly above what we expected during our last conversation with the market in August.” .

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Herbert Diess, CEO of VW, said: “The third quarter results show once again that we now need to consistently accelerate productivity improvements in the volume business.

It’s not just the automakers that have been hit hard by the chip shortage. Nokia, the telecommunications equipment maker that previously made mobile phones, said the shortage could worsen in the last three months of 2021.

“At the moment, we are limited by the availability of semiconductors, which will affect [the fourth quarter] and there is a strong possibility that this challenge will get bigger before it starts to improve, ”said Nokia Managing Director Pekka Lundmark.

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