Semiconductor crisis overshadows big car show

Automotive Industry

Source: Politico, 2021-09-06

One of Europe's biggest car shows got underway on 6 September attempting to put a positive spin on an industry clobbered by the pandemic, but there's another huge shadow over any revival — the computer chip shortage that's wreaking havoc on car factories around the globe.

All of Germany's big three carmakers — Mercedes Benz, BMW and Volkswagen — warned of continued disruption, with Daimler's CEO Ola Källenius saying he thinks the semiconductor supply will improve only in the fourth quarter of 2021 and that shortages will continue into 2023. That's putting a damper on the mood at this week's IAA International Motor Show.

Volkswagen is expecting “to deal with effects until the first half of 2022, maybe even further," Board Chairman Hans Dieter Pötsch told the dpa news agency on 6 September. Given that major chip factories are "running around the clock, there is currently no major room for improvement," he said.

BMW CEO Oliver Zipse made similarly gloomy predictions on 6 September, saying: "I think that the fundamental tension in the supply chains will continue for the next six to 12 months."

Consultancy PwC warned the bottleneck will drag on manufacturers' production and sales plans, with the industry already producing 4m fewer vehicles than planned in the first half of 2021. With the expansion of chip production facilities taking up to two years and the construction of new plants up to five years, "no short-term recovery in semiconductor supply is expected," PwC Director Tanjeff Schadt said. 

That means automakers' planned production increases in the third and fourth quarters "need to be critically questioned," PwC said.

There are a host of reasons for the shortage — many of them unplanned. "You couldn't predict the storm in Texas or the fire in an important Japanese factory," said Annett Fischer, a Spokesperson for parts maker Bosch, adding: "In the same way, you can't predict how the pandemic situation will develop in the important Southeast Asian countries."

Those chips are needed to power the shift of cars into smarter and greener vehicles. "The transformation of mobility means more and more chips are needed," Fischer said.

Despite chip worries, carmakers see the IAA as a sign of the industry's revival after one of the worst years in its history.

The show — normally held in the vast halls of Frankfurt's conference venues — is dramatically smaller than its last pre-pandemic iteration in 2019. It was canceled last year and now is in much smaller quarters in Munich. It's also about much more than cars — now it represents the entire spectrum of mobility from cars to bikes and mobility start-ups.

While the big three German carmakers were there, many other rivals, including Toyota, Stellantis and Tesla, skipped the show. The cars being promoted are no longer the expensive, luxury high-horsepower models of past shows. Now the focus is electric and accessible.

As part of its offering, Volkswagen promised to bring the cost of electric cars under €20,000 by 2025 with a prototype model on show in Munich. Rather than trotting out a Formula One driver, Zipse brought a virtual version of influencer Gemma Styles during his presentation and also showed off the company's new e-bikes, targeted at young urbanites who "don't want something people already know."

Although the number of cars is fewer than at past shows, they're still getting the most eyeballs. The BMW presentation was so packed that security had to close off the booth. Alongside the e-bikes, the Bavarian car maker unveiled its "i Vision Circular," a car made entirely from end-of-life and sustainable raw materials.


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