Running out of chips, automakers are cutting global production

Running out of chips, automakers are cutting global production

Running out of chips

Toyota will cut production by 40% in September, followed by Volkswagen. The global auto industry will produce 4 million fewer vehicles than expected this year

Chip (Magnus Engo / Unsplash) The auto industry remains worried about the global shortage of chips and even the largest manufacturers launch a alert on the coming months. This is the case of Toyota, the largest company in the world, which has announced that it will cut production by 40% in September, probably followed by Volkswagen, the second company on the global stage. This means that the Japanese company will have to reduce the expected numbers from 900,000 cars to 540,000 next month, while the German company speculates a further slowdown after an initial impact already felt in February.

Toyota had so far managed to compensate for the famine of chips thanks to a revitalized business continuity plan shortly after the Fukushima earthquake ten years ago, then thanks to more chips in stock. This has avoided production cuts so far, except for a longer summer closure of plants in France, the Czech Republic and Turkey. Following the latest announcement, the builder's shares on Wall Street fell 4% on Thursday, August 20.

A general decline

The global auto industry will produce 4 million fewer vehicles than expected this year, losing about $ 110 billion in sales, according to an estimate reported by the Washington Post in early August. The current upsurge is partly due to a return of cases from Covid-19 in Asia and is affecting industrial plants almost everywhere, from North America to Europe and the East. To overcome the uncertainty of the chip supply chain, characterized by volatility and bottlenecks, US President Joe Biden has pledged to finance an infrastructure plan for the sector with 37 billion dollars. A single semiconductor factory can cost up to 10 billion for specialized machinery, an expense that few companies are willing to bear.

Especially since the fog is still thick on the future of the sector, on which the needs also depend electronics and household appliances and which has put a strain on the automotive supply chain. Even second-hand car prices rose 14% in the UK and 40% in the US, the Guardian reports. Carlos Tavares, CEO of Stellantis, has predicted that the chip crisis will easily come to 2022. It is complicated to use different semiconductors: reengineering a model takes 18 months. The manager explained that in the meantime priority will be given to vehicles that generate the most profit, but also that the company could accelerate the 30 billion euro electrification plan by increasing production capacity.

The other stops

The chip shortage also affects Ford, which will suspend production of the bestselling F-150 pickup next Monday for a week, while General Motors has shut down three truck plants in North America for a week. In July, BMW shut down its plants in Germany, Austria and the United Kingdom. Tesla had to reprogram the software to optimize the use of the chips and had to choose whether to produce Powerwall accumulators or car batteries. Nissan closed for two weeks in Tennessee due to an outbreak at a supplier plant in Malaysia. In a network that highlights how the scenario is interconnected and interdependent, the shares of BMW, Daimler, Renault, Volkswagen and Stellantis have suffered drops in the stock market by up to 2%.

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