Global chip shortage to continue into 2022

Monday, 26 July 2021

It seems the semiconductor storm is not yet over, as the heads of both Daimler and Stellantis have gone on the record in saying there’s no real end in sight just yet.

Speaking at an industry event in Detroit recently, Daimler and Mercedes-Benz CEO, Ola Kallenius, and the boss of Stellantis, Carlos Tavares, both said that the chip shortage will extend into 2022.

'The semiconductor 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,' Tavares said at an Automotive Press Association of Detroit.

The semiconductor shortage will carry on into 2022, according to the bosses of Daimler and Stellantis.

He added that the shortage will force his company to make key parts on its own rather than rely on suppliers. He said Stellantis is in the process of signing a deal to obtain its own supply of lithium to make electric vehicle batteries.

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Stellantis is also set to build five new battery plants by 2025 across Europe and North America, as part of a 30 billion euro (NZ$50.6 billion) investment into electrification. Tavares said Stellantis could add more money to that figure if needed, through more battery plants or raising the capacity of the current plants.

The crisis, which was compounded by increased demand as Covid-19 halted travel and holiday spending, has forced carmakers around the world into dropping features, delaying shipments and increasing prices.

According to Tavares, it takes around 18 months to re-engineer a vehicle to use a different chip because of the sophistication of the technology. Stellantis, and other makers, will prioritise the models with the highest margins with the chips that do come through.

Some manufacturers, like Daimler and Mercedes-Benz, have built vehicles without necessary chips and parked them until the extra silicon arrives later.

'Improving supply visibility is a top priority for us,' Ola Kallenius told a conference call with analysts and investors, although he said the chip shortage 'is a fixable problem.'

'We have some unfinished cars, but we have not let this balloon out of proportion.”

Daimler's Chief Financial Officer, Harald Wilhelm, added that, although the chip shortage will last through 2022, it won’t be as severe as 2021.

While Mercedes-Benz sales have jumped in the last quarter of 2020 and the first quarter of 2021, a slower second quarter has brought full-year sales expectations down to 2020 levels.