Company / Analytics

Analytics, 28 October 2021

Global Chip Crisis impact auto sector earnings

Third-quarter earnings from car manufacturers this week provided further implications of the global semiconductor on the auto industry. Leading manufacturers including Volkswagen, Stellantis, General Motors, and Renault reported quarterly results that were affected by the chip shortages. Volkswagen, Europe’s leading car manufacturer reduced its outlook for deliveries, sales expectations and warned of cost cuts as it reported lower-than-expected quarterly operating profit. Volkswagen produced about 800,000 fewer cars (35% less) than in the same quarter in 2020.

Meanwhile, Stellantis - the world’s fourth-largest automaker, posted a 14% fall in Pro-forma quarterly revenue and cut planned quarterly production by 30%, or 600,000 due to chip shortages.

The semiconductor shortage which appears to have no end in sight is likely to cost the auto industry up to $210 billion globally in revenue this year, according to estimates.

Volkswagen earnings and outlook

Volkswagen is Europe’s largest and also the world’s second top car producer. The company cut its outlook for deliveries, sales expectations and warned of cost cuts as it reported lower-than-expected quarterly operating profit.

Volkswagen is facing pressure as it tries to switch more of its production to electric vehicles, amid competition from Tesla which plans to open a new plant in Berlin, Volkswagen’s home territory.

Here’s what you need to know:

Global Chip Shortage

In addition to shutting plants as the pandemic took hold last year, carmakers are competing against the sprawling consumer electronics industry for chip supplies.
Semiconductor chips are used in manufacturing nearly all elements of the car - from brake sensors to power steering to entertainment systems, and their shortage has led automakers around the world to cut or suspend production, pushing up both new and used vehicle prices amid robust demand from consumers.

The supply chain snarls from a fire at a chip-making plant in Japan to coronavirus lockdowns in Malaysia, central to global chip supplies, have only compounded the industry’s problems.

The global chip shortage is likely to persist and the auto industry is expected to lose about $210 billion globally in revenue this year. In terms of vehicles, production of 7.7 million units will be lost in 2021, according to forecasts by AlixPartners.

All leading automakers have expressed concerns about the impact of the global chip shortage on the industry. Earlier this month, General Motors, the parent company of Chevrolet, GMC, Cadillac, and Buick, said it was temporarily halting production at six of its North American factories as a result of the global chip shortage.

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