The global auto industry is preparing for an acute shortage of chips

The global automotive industry is facing a severe shortage of semiconductors, which are used in parking sensors and airbags in particular, as car demand recovers faster than expected. 

Chip makers, already overloaded with orders due to the boom in consumer electronics sales amid the coronavirus pandemic, are trying to satisfy the demands of auto companies, but other industries are being preferred. Automakers are bracing for even worse chip shortages in the coming months amid warnings from company executives that supply is unlikely to meet demand until at least the second half of this year, writes the Financial Times.  

Jacques Aschenbroix, CEO of Valeo, one of the world's largest auto parts makers, told the FT that the global chip shortage is likely to continue until at least the summer. "The second quarter is going to be tough... There should be a recovery in the second half. That's what the whole industry is thinking about," said Aschenbroy, who has led Valeo since 2009. Volkswagen AG, the world's second-largest automaker, warned a few weeks ago that it would produce 100,000 fewer vehicles in January-March 2021 due to problems with chip shortages.  

Some analysts, however, expect production to fall by 400,000, the FT notes. A source familiar with the matter told the publication that the German group is likely to continue to experience shortages in the second half of the year and that production losses are unlikely to be made up before the end of this year.  
Continental AG, Germany's largest automotive supplier, said that due to the long lead times in the semiconductor industry, chip stocks are unlikely to be fully replenished until the second half of 2021. 

French Renault SA has also warned that the deficit is likely to widen in the coming months until things improve in the third quarter. The company expects to cut production by 100,000 vehicles this year, although it promises to try to keep damage to a minimum.  

Market research firm IHS Markit (SPB: INFO) estimates that as a result of the lack of semiconductors, the production of about 1 million vehicles will be delayed in the first quarter, out of a total annual production of approximately 84.6 million. Aschenbroy, unlike some other executives, believes that such a volume can still be achieved in the second half of the year. He said supply chains have generally functioned well during the COVID-19 pandemic, but large-scale government assistance has played an important role in keeping companies alive, which could change in the coming months.

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