Volkswagen and Stellantis say 1.4 million vehicles went into production in the third quarter due to lack of chips

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The global shortage of semiconductor chips cost Volkswagen and Stellantis together 1.4 million vehicles in production losses in the third quarter, the two largest automobile manufacturers in Europe announced on Thursday, although both reported the first signs of improvement.

Volkswagen, Europe’s largest automaker and also number 2 in the world, lowered its delivery outlook, dampened sales expectations and warned of cost cuts as the company reported lower-than-expected quarterly operating income.

The German company stated that it produced around 800,000 fewer cars, around 35 percent fewer than in the same quarter of 2020.

Stellantis, the world’s fourth largest automaker, saw pro forma quarterly revenue decline 14 percent after slashing planned quarterly production by 30 percent or 600,000 vehicles due to chip shortages.

Stellantis CFO Richard Palmer reported in October of a “moderate” improvement in the chip range and expected this to continue into the fourth quarter.

But he added that problems in the supply chain made it difficult to predict the scarcity of automotive semiconductors, which has plagued the industry for most of the year.

“Semiconductor visibility remains a tough issue for the industry,” said Palmer.

Car manufacturers that closed their factories last year in the wake of the COVID-19 pandemic are competing with the widespread consumer electronics industry for chip supplies.

The clutter in the supply chain from a fire at a chip factory in Japan to a coronavirus lockdown in Malaysia, which is central to global chip supply, has only compounded the problems facing the industry.

The shortage of chips, used from brake sensors to power steering to entertainment systems, has led automakers around the world to cut or suspend production, increasing both new and used car prices in light of robust consumer demand Height drives.

At the end of September, Stellantis’ new vehicle stocks fell by more than 42 percent compared to the previous year.

Palmer told analysts that “in view of the volatility of the market”, Stellantis does not currently expect any major production increases in 2022, but will concentrate more on maintaining price levels while struggling with rising raw material costs.

He said the production downtime could push Stellantis’ sales “a touch lower” in 2021 than the previous forecast.

Volkswagen CFO Arno Antlitz said that the shortage of chips “made it clear to us that we are not yet sufficiently resistant to fluctuations in utilization”.

“Even if the visibility of the situation is still difficult to predict, we see the beginning of a stabilization of the chip supply and expect” an improvement in the financial figures in the fourth quarter, Antlitz told journalists.

Volkswagen posted operating profit of 2.8 billion euros (approximately 24,481 billion rupees) in the third quarter, 12 percent less than last year and less than 2.99 billion euros (approximately 26,142 billion rupees) from Refinitiv. But the company, which aims to overtake Tesla as the world’s largest seller of electric vehicles (EVs) by the middle of the decade, confirmed its operating profit margin target of 6.0 to 7.5 percent for 2021.

“Obviously, the current volatility brutally shows the extraordinarily high fixed costs of Volkswagen, especially for the performance of the VW brand, which also seems to bear the majority of the semiconductor-related bottlenecks,” wrote Bernstein analyst Arndt Ellinghorst in a customer note.

Stellantis, which emerged at the beginning of the year from the merger of Fiat Chrysler and the French PSA, confirmed its target for the year of an adjusted operating profit margin of around 10 percent.

Other major automakers, including General Motors and Renault, also hurt quarterly results from the chip crisis.

© Thomson Reuters 2021

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