Global chip crisis won’t ease until 2023, say car-makers

The global semi-conductor shortage that has crippled the worldwide auto industry during the coronavirus pandemic will continue well into 2023 and potentially a lot longer, say Germany’s biggest car-makers.

BMW, Mercedes-Benz and Volkswagen say the COVID-related computer chip crisis, which has limited vehicle production and helped push up prices of both new and used vehicles in Australia, won’t ease until at least 2023 – much later than previously expected.

General Motors, Ford, Stellantis, Renault and Jaguar Land Rover production has been heavily impacted by the issue, which even forced Volkswagen to deliver sound systems in Brazil.

Toyota was this month forced to cut global production by 40 per cent due to the chip shortage, delaying first customer deliveries of the new Toyota LandCruiser 300 Series, while BMW and Mercedes-Benz have both been forced to ‘decontent’ a range of technical features from a number of models locally due to the lack of chip supplies.

Those two German car-makers now estimate chip-related production problems will exist for much of next year and potentially well into 2023.

“Several chip suppliers have been referring to structural problems with demand,” Daimler CEO Ola Kallenius told Automotive News at this week’s Munich motor show, where Mercedes-Benz revealed a bevy of high-tech, chip-heavy electric vehicles.

“This could influence 2022 and [the situation] may be more relaxed in 2023,” he said.

BMW CEO Oliver Zipse was more positive, saying he expects chip supplies to remain tight well into 2022 but that no long-term effects are expected since the auto industry remains an attractive client for chip-makers.

“I expect that the general tightness of the supply chains will continue in the next six to 12 months,” he said.

But Volkswagen CEO Herbert Diess was more pessimistic, suggesting it may take years for increasing chip production to catch up with unprecedented online demand for consumer electronics gadgets.

“The internet of things is growing and the [semi-conductor] capacity ramp-up will take time,” he told Automotive News. “It will be probably a bottleneck for the next months and years to come.”

Separately, Kallenius told carsales in Munich ongoing chip crisis was a giant stress test for the entire car industry, but said it had taught Daimler valuable lessons that would help safeguard it from similar issues in future.

“We're not out of COVID yet. What are we learning in the stress test? Go deeper in the technology supply chain – although that doesn't necessarily protect you from a COVID-related shutdown.

“But still it has encouraged us to have full transparency down to every wafer.”

Apart from more closely monitoring its suppliers, the Mercedes-Benz chief said the lack of chip supplies has forced engineers to re-evaluate the design of Daimler’s electrical architectures and to phase-out older technologies faster.

“A lot of the very simple chips are older tech which are absolutely right for their application, but producers are not investing in capacity for simpler chips,” he said.

Following a deep-dive investigation, Kallenius said Mercedes discovered that chip-makers were prioritising production of more modern semi-conductors and limiting production of older chips.

Kallenius said that in future Mercedes-Benz will phase-out older tech more quickly to better track of supply and limit exposure to under supply.

He said this could include the introduction of multiple electrical architecture upgrades during the life of a model line.