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Global chip shortages impact automotive industry

The global automotive industry is facing massive disruption with leading brands cutting production due to reduced supplies of semiconductors.

Across Europe and India, in particular, car manufacturers are struggling to source sufficient semiconductors and while semiconductor manufacturers are responding it’s likely that additional volumes will not become available for another 6-9 months.

As a consequence, car manufacturers are facing a potentially crippling shortage, with growing bottlenecks causing significant problems. Volkswagen is expecting to produce 100,000 fewer cars in the first quarter of the year, because its suppliers have struggled to secure supplies from their contractors, while Nissan and Honda have both signalled cuts in production of up to 20 per cent.

The problem has been exacerbated by semiconductor manufacturers switching production to other customer industries, such as consumer electronics, in the face of the Covid-19 pandemic and by car manufacturers ramping up production far more quickly – especially in China - than semiconductor manufacturers had expected. The problem has also been made worse by a big increase in electric vehicle production, which has increased the industry’s demand for semiconductors.

There’s no quick solution and the situation is becoming critical and likely to worsen in the next few months, with analysts expecting it to persist well into 2021.

Neil Tyler

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