The automobile industry is suffering from a shortage of computer chips; consequently, the production has slowed and is set to drag on for months.
Microchips are essential components of modern cars, they have been in short supply since the end of last year.
Carmakers and suppliers have warned that a lack of semiconductors will hurt the production of the car industry, which had turned in solid results for the first half of this year.
To some extent, the fault lies with carmakers, who scaled backorders when the pandemic hit. Chipmakers, seeing a rise in demand for consumer electronics, shifted their output towards these types of equipment.
Carmakers were therefore left in a tight situation when demand returned. Many had to slow the production; others had to halt their factories temporarily.
Automakers and analysts say that the effect is expected to last through the rest of the year.
Jaguar Land Rover has warned the chip shortage could cut its third-quarter output by half. Volkswagen Group expects the impact to be “more pronounced” in the third quarter as it lowered its annual production forecast by roughly 450,000 vehicles.
“The risk of bottlenecks and disruption in the supply of semiconductor components has intensified throughout the industry,” the German automaker said.
By favouring high-end vehicles, VW said, they may cope with the shortage.
US automaker Ford noted that the shortage meant fewer promotions of employees and more focus on its most profitable models.
Due to the shortage of chips, Nissan had to push back its new all-electric crossover launch, the Ariya.
“The situation will improve as new production capacity becomes available, but the problem won’t be over by the end of 2021 and could continue until 2023,” analyst Dudenhoeffer said.
The shortage is expected to result in an overall loss in 5.2 million vehicles this year, he added.
Consumers would likely notice longer delays and higher prices as dealers have worked through their stocks and manufacturers offer fewer promotions.
As unfulfilled demand has shifted from the new car market, prices for used cars have also risen.