Chip shortage could persist for few more years, Volkswagen CEO says

First, carmakers thought the worst of the chip shortage would be in the first half of the year. Then, it was the third quarter. Now, the heads of Germany’s automakers are pushing back even further their estimations of when the supply issue will stop constraining car production.

“Probably we will remain in shortages for the next months or even years because semiconductors are in high demand,” Volkswagen chief executive Herbert Diess told Bloomberg Television. “The internet of things is growing and the capacity ramp-up will take time. It will be probably a bottleneck for the next months and years to come.”

Mr Diess and his counterparts Ola Kallenius at Daimler and Oliver Zipse of BMW delivered their doses of distress as most European carmakers gathered in Munich for the first auto show since before the pandemic hit. Mr Kallenius cautioned on Sunday that the semiconductor shortage may not entirely go away next year and could take until 2023 to be resolved. Mr Zipse warned the crisis could last six to 12 months.

VW and Mercedes are among the automakers that have been hit this quarter by factory shutdowns in Malaysia, which in recent years emerged as a major hub for chip testing and packaging. Key suppliers including Infineon Technologies, NXP Semiconductors and STMicroelectronics operate plants in the country.

There is hope that the situation will start to ease in the fourth quarter, Daimler’s Mr Kallenius said, though he anticipates fallout from a “structural” demand issue also will influence industries in 2022. A Japanese chipmaker that supplies to Toyota Motor predicted last month that the supply crunch could last through all of next year.

The auto industry worldwide will need roughly 10 per cent more production capacity for chips, Murat Aksel, VW’s purchasing chief, told reporters late on Sunday. Mr Diess said on Monday that VW hopes to overcome issues brought about by the Covid-19 outbreak in Malaysia “toward the end of this month, probably next month, and then recover in the last quarter of this year”.