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World NewsChip shortage continues to wreak havoc on VW and Stellantis

Chip shortage continues to wreak havoc on VW and Stellantis

The underbody of an ID.3 electrical car is assembled at a Volkswagen facility in Dresden, Germany, on January 29, 2021.

Matthias Rietschel | image alliance | Getty Images

LONDON — The world chip shortage is constant to wreak havoc on the automotive sector, with a number of of the world’s greatest carmakers blaming the disaster for disappointing monetary outcomes this week.

Volkswagen and Stellantis stated Thursday that the continuing semiconductor shortage stays a serious downside for them.

“It was a challenging quarter,” VW CEO Herbert Diess advised CNBC’s “Squawk Box Europe” Thursday.

“Our volume brands suffered most because of semiconductor supply,” Diess stated, referring to Seat, Skoda and Volkswagen.

In comparability, Porsche and Audi (Volkswagen’s premium manufacturers) have been “quite resilient,” Diess stated, including that they’ve delivered optimistic outcomes.

With no finish in sight, the semiconductor chip shortage is now anticipated to price the worldwide automotive business $210 billion in income in 2021, in accordance to consulting agency AlixPartners.

From a geographic perspective, Diess confirmed that VW’s China enterprise has been disproportionately affected.

“China really suffered,” he stated, including that VW misplaced market share within the nation.

The group prioritized its premium manufacturers in China and “compromised” on quantity gross sales, Diess stated, including that the VW model “suffered a lot.”

The German carmaker minimize its outlook for deliveries, toned down gross sales expectations and warned of price cuts because it reported lower-than-expected working revenue for the quarter.

Not all dangerous?

But Diess claimed that it is not all unfavourable. “The demand side is really good,” he stated. “We have filled order books in all areas and our EV [electric vehicle] sales are coming along well.”

“We had to reduce our sales outlook but revenue outlook is still positive and [it has been] significantly growing over the last year,” Diess stated. “That means we can keep our margin guidance, which is very important.”

Diess is optimistic that semiconductor provide will decide up within the subsequent quarter, however he nonetheless expects to see some provide constraints in 2022.

“We foresee that semiconductors will be bottlenecks in our supply chain,” he stated. “There might be others as well, but mostly we will see semiconductor constraints.”

Elsewhere, Stellantis — fashioned by way of the merger of Fiat Chrysler and France’s PSA — has additionally been damage by the chip shortage.

Like VW, it additionally missed analyst expectations when it reported its third-quarter outcomes Thursday. It reported a 14% fall in third-quarter income on a pro-forma foundation after semiconductor shortages minimize deliberate quarterly manufacturing by 30%, or 600,000 autos.

“The level of chip shortage was probably slightly higher than what we had expected when we last spoke to the market in August,” Chief Financial Officer Richard Palmer stated, including that the full-year complete of misplaced manufacturing due to the chip shortage would high a earlier forecast of 1.4 million items.

But Palmer stated the enterprise has seen a “moderate” enchancment on the chip provide state of affairs this month in contrast to September. He expects the pattern to proceed by way of the fourth quarter.

“Visibility on semiconductors continues to be a difficult subject for the industry,” Palmer added.

Analysts at JPMorgan and UBS imagine now could be the perfect time for traders to enhance their publicity to the automotive sector.

“Time to increase the exposure to auto stocks, in our view,” stated a UBS analyst group led by Patrick Hummel in a word on Oct. 8.

JPMorgan’s head of European autos fairness analysis, Jose Asumendi, advised CNBC Wednesday that he and his group have been telling traders to enhance their publicity to autos for round a month.

“We are quite selective in terms of where we see value,” Asumendi stated, including that Daimler, Renault and Stellantis are the financial institution’s high inventory picks among the many European carmakers.

GM and Ford

The chipmaker view

“We do believe that the situation in 2022 will really improve definitively compared to 2021,” Grandi stated, including that chipmakers had been caught off guard when demand for automotive chips peaked in the beginning of 2021.

“The situation will improve in 2022,” he stated. “I expect we will go back to a situation where you will have the right balance between inventory level, acceptable lead times, [but] not before 2023.”

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