The current microchip shortage is causing the automotive industry in Europe to scale back production. Popular brands like Toyota have seen a global output decrease of 40%. In September, Toyota produced 40,000 fewer vehicles in Europe. It is unknown when the industry will recover from the microchip shortfall.
Auto Industry Impact
According to the German automotive association, the VDA, the shortage of microchips will continue to affect car production in the short term and beyond. If the EU fails to ramp up the manufacturing of semiconductors, more industries will be adversely affected. After all, the automotive industry is not the only one needing microchips.
As a whole, Germany will see a production decrease of 400,000 cars in 2021. Germany and the EU need a long-term solution to the microchip shortage to ensure economic recovery. Currently, manufacturers like Ford and Volkswagen warn that the waning silicone supply will continue to cause production delays. Ford’s dual rear wheel trucks saw delivery delays earlier in the year because of missing microchips.
Covid-19 Slows Economic Recovery
Some industry professionals believed the microchip shortage would resolve after the summer months; however, the fourth wave of the coronavirus has hit some facilities hard. In Malaysia, where Volkswagen gets its semiconductors from, factories have shut down. Supply is unable to keep up with demand.
As the global coronavirus transmission rates fall, factories will reopen and resume their previous production rate. But this may not be enough to solve the gap in demand as internet technology continues to grow and change. Ford Europe executives speculate that the shortage may continue into 2024, but no one knows if this will be the actual case.
Electric Cars Increase Chip Demand
The push towards electric cars has made the situation worse. Electric vehicles require more microchips than their predecessors. For example, Ford installs approximately ten times the chips in their electric autos compared to their gas-consuming vehicles. As the automotive industry adjusts to changes in technology, the need for chip supply will continue to grow.
Material Shortage to Continue
Compounding the shortage of microchips in the automotive industry is the shortage of raw materials. Companies are running into supply problems with plastic and steel. These shortages will affect the retail prices consumers will have to pay. Luckily, despite cost increases, consumers seem eager to get their hands on the latest automobile offerings.
Overall, the chip shortage has affected the auto industry the most. Car companies have faced assembly line closures and delivery delays on products. Moreover, some companies had to adjust their cars’ designs to deal with the lack of microchips. While the automotive industry tries to find an effective way to deal with its supply issue, it remains uncertain when supply will catch up with demand.
