Global chip shortage to drag on into 2022

The global semi-conductor shortage that has crippled new vehicle supply in Australia and forced car-makers to remove equipment from key models to keep production lines rolling is set to continue into 2022.

Speaking at an industry event in Detroit overnight, Daimler CEO and head of Mercedes-Benz, Ola Källenius, and his opposite number at Stellantis, Carlos Tavares, separately forecasted the chip shortage to remain an ongoing issue, with no end to the crisis in the short-term.

Källenius and Tavares both conceded the semi-conductor shortage was one of several factors affecting global vehicle production and had compounded high raw material prices.

As seen with some Mercedes-Benz models such as the Mercedes-AMG G 63, higher production costs and reduced output has in turn led to an increase in pricing and, subsequently, discontinuation.

“The entire industry is currently struggling with longer delivery times, which unfortunately also affect our customers,” said Källenius. “We are doing what we can to minimise the impact.”

Mercedes-Benz chief financial officer Harald Wilhelm told investors at the same function the chip shortage should be less severe in 2022.

COVID-related shutdowns of semi-conductor factories are said to be responsible for the huge shortfall in chip supplies, an issue not only affecting the car industry but consumer electronics and computer manufacturers as well.

But that’s not the only issue at play.

When the initial lockdowns triggered a collapse in global vehicle sales last year, car-makers slashed orders for parts. At the same time, there was a huge surge in demand for consumer electronics, which caused the chip industry to shift their production to serve that demand.

When car sales began to recuperate at the back end of 2020 and have since surged in 2021, semi-conductor plants concentrated in Taiwan, South Korea and China could not supply the rush of new orders from the auto industry.

The semi-conductor shortage has forced car-makers to get creative with their supply and manufacturing processes. Some, including BMW, have built vehicles without the necessary chips and parked them up for later installation, while others have dropped features from their models.

Jaguar Land Rover is among several manufacturers now looking to remove specification from their cars to ensure they’re able to keep delivering vehicles to Australia.

In April, Mercedes-Benz Australia confirmed it had been forced to omit its PRE-SAFE safety technology from a host of vehicles. It also removed the Mercedes-Benz A 250 hatch and sedan from its line-up.

BMW Australia followed suit in June, confirming that it too had adjusted price and spec levels due to the global chip shortage.

The Stellantis Group, whose umbrella of companies extends to Alfa Romeo, Jeep, Maserati, RAM, Fiat, Citroen and others, has resorted to prioritising the sale of its highest-profit models with the chips it is receiving.

“The semi-conductor crisis, from everything I see and I’m not sure I can see everything, is going to drag into ’22 easy because I don’t see enough signs that additional production from the Asian sourcing points is going to come to the west in the near future,” said Tavares.