chip crisis: Carmakers feel chip crisis easing as global growth slows

The global semiconductor shortage that has plagued the auto industry for nearly two years is showing signs of easing, at least for now.

Mercedes Benz AG, Daimler Truck Holding AG and BMW AG are among the automakers that are now getting enough of the high-tech components to produce at full capacity after experiencing months of crippling breakdowns.

The breakthrough comes earlier than the companies had predicted and marks a bright spot for an industry facing a deteriorating economy and inflation as it manages a historic transition to electric vehicle production. Manufacturers applaud the improvement in chip supply, but do not declare victory yet.

“We’re still tracking it week by week, but so far we’ve had virtually no production issues worldwide,” said Joerg Burzer, head of production and supply chain management at Mercedes. “There are delivery issues here and there,” he said, “but nothing compared to what it was like last year.”

Even as demand for cars boomed, automakers had to curtail production because factories around the world couldn’t buy enough chips that are essential for more and more automated vehicles. The outages were so severe that global passenger car production shows little sign of recovery to pre-pandemic levels.


As chip supply improves, automakers are clearing backlogs and concerns are mounting about how consumer demand will hold up amid rising inflation and higher interest rates. Elon Musk, CEO of Tesla Inc. said the electric car maker must cut its workforce by 10% and has a “super bad feeling” about the economy, according to Reuters, which quoted an internal memo.

But not everyone is as pessimistic as Musk. According to a study by the Ifo Institute, German car manufacturers’ sentiment improved significantly in May. The survey showed growing confidence among automakers that they will be able to raise prices to cope with rising raw material costs.

Part of the new chip availability is due to the deteriorating economic outlook and inflation, which has reduced demand for consumer electronics that also use the components. Karin Radstrom, head of Daimler Truck’s Mercedes brand, said the company is now getting the chips it needs to clear a backlog of orders.


“It’s not perfect, but it’s better than last year,” Radstrom said in an interview. “I try not to celebrate too early. We are still monitoring the situation closely.”

BMW expressed a similar reserved optimism, saying that all factories are up and running and that the company is experiencing no disruptions due to the supply of chips.

“Currently, the situation is a bit more stable,” said a spokesperson, adding that BMW is still monitoring the chip supply on a daily basis and is not ruling out the possibility of further failures in the coming weeks and months.

Volkswagen AG, which, like others, estimated the blockage would begin to ease in the second half of 2022, is also seeing steady supplies, according to a spokesman, who emphasized that there is still significant uncertainty over the coming months.

Harry Wolters, president of the DAF Trucks unit of Paccar Inc., sees the same trend.

“We’ve seen a better supply of components than we might have expected five or six weeks ago,” Wolters said. “So in the US and Europe we’ve been able to increase the build speed.”

But not all companies enjoy the same relief. Volvo Trucks said it still sees limited chip availability and expects an impact on production in the second quarter. And according to research by Susquehanna Financial Group, delivery times for chips – used in a range of electronics – remained flat in May, a sign that delays are still ongoing.

Mercedes chief executive Ola Kallenius said last year that his company would resort to using a more expensive semiconductor to avoid the shortage. Jim Farley, chief executive officer of Ford Motor Co., said last month that the company would buy chips all over the open market.

— With help from William Wilkes, Wilfried Eckl-Dorna, and Debby Wu.

Leave a Comment

Your email address will not be published.