Automakers Get a Relief As Chip Crisis Abates


After almost two years of chip shortages automakers are getting enough semiconductors to produce at full capacity.

FREMONT, CA: The global semiconductor scarcity that has hampered the automotive industry for nearly two years is beginning to ease, at least for the time being. Mercedes-Benz, Daimler Truck Holding, and BMW are among the automakers who have now received enough high-tech components to resume full production after months of severe outages. The breakthrough comes sooner than the firms expected, and it's a silver lining in an industry that's dealing with a failing economy and rising inflation while also navigating a historic shift to electric vehicle production. Manufacturers are delighted about the improved chip supply, but they aren't declaring triumph just yet. The head of manufacturing and supply management remarked that they are still observing the growth week by week. He also mentioned that they did not face any issues running production so far. Despite the rising demand for automobiles, automakers have been forced to reduce production due to a global shortage of essential semiconductors for increasingly sophisticated vehicles.

The disruptions have been so severe that global passenger car production has hardly recovered to pre-pandemic levels. Automakers are attempting to reduce their order backlogs as semiconductor availability improves, and concerns are growing about how consumer demand will fare in the face of rising prices and interest rates. According to Reuters, Tesla CEO Elon Musk stated that the automaker needs to slash ten per cent of its workforce and that he does not have a good feeling about the economy. Unlike Musk, not everyone has a pessimistic view. According to an Ifo Institute survey, sentiment among German automakers improved dramatically in May. The study revealed that manufacturers are increasingly more confident in their ability to boost prices to offset rising raw material costs.

Some of the increased chip supply is due to the faltering economy and inflation, which has reduced demand for consumer electronics that employ the components. The Head of Daimler Trucks’ Mercedes brand Karin Radstrom noted that the company is now obtaining the chips it needs to work through a backlog of orders. In an interview, Radstrom acknowledged that though not ideal, it is better than the previous year, and the company is still keeping a tight eye on everything. BMW voiced optimism for the future, stating that all plants are operational and that the business is not facing any delays owing to chip shortages. A spokesperson mentioned how the situation is currently a little bit more steady. BMW continues to check chip supply daily and does not rule out new difficulties in the next weeks and months.

A Volkswagen representative also predicted that the supply shortage is likely to ease in the second half of 2022, and the company is witnessing regular supplies. However, there remains a lot of uncertainty regarding the future months. A similar tendency has been seen by Harry Wolters, president of Paccar's DAF Trucks division. However, not all businesses are reaping the same benefits. Limited chip supply is continuing a problem for Volvo Trucks, which expects a negative impact on second-quarter output. Susquehanna Financial Group analysis suggested that delivery dates for chips, which are used in a variety of gadgets, were steady in May, indicating that lags persist. To avoid the shortfall, Mercedes CEO Ola Kallenius indicated that his company will use a more expensive semiconductor. In the previous month, Ford Motor Corporation CEO Jim Farley stated that the company would purchase chips wherever it could on the open market.