Europe’s top carmakers calculate the cost of mounting the chip crunch by Reuters

Reuters. File photo: The VW logo appears at the first hearing of a consumer group’s class action lawsuit by Volkswagen owners against VW in the diesel emissions fraud scandal, in September at the High Regional Court in Braunschweig, Germany.

By Nick Kerry, Christoph Stetz and Julio Piovakkari

LONDON (Reuters) – Volkswagen (DE 🙂 and Stellantis lost a combined 1.4 million vehicles in the third quarter due to a shortage of global semiconductor chips, Europe’s two largest carmakers said on Thursday, although both showed some early signs of improvement.

Volkswagen AG (OTC :), Europe’s top car company and the world’s No. 2, downgraded its outlook for delivery, lowered sales expectations and warned of lower costs as it reported lower-than-expected quarterly operating profit.

The German company said it had built about 800,000 fewer cars, or about 35% less than in the same quarter of 2020.

Stellantis, the world’s fourth-largest automaker, posted a 14% decline in pro-form quarterly revenue after the chip deficit cut quarterly production planned by 30,000 or 600,000 vehicles.

Stellantis Finance chief Richard Palmer reported a “moderate” improvement in chip supply in October and hoped it would continue until the fourth quarter.

But he added that the supply chain problem means the lack of autonomous semiconductors is hard to predict, which has plagued the industry for most of the year.

“Visibility in semiconductors is going to be a difficult topic for the industry,” Palmer said.

Carmakers, who shut down plants last year due to the Kovid-19 epidemic, have seen themselves competing against the broader consumer electronics industry for chip supplies.

From the fire at a chip-making plant in Japan to the coronavirus lockdown in Malaysia, the epicenter of global chip supply, has exacerbated problems in the supply chain snarls industry.

The shortage of chips used in everything from brake sensors to power steering to entertainment systems has forced automakers around the world to reduce or suspend production, pushing up the prices of both new and used cars amid strong consumer demand.

At the end of September, Stalantis’ new vehicle inventory fell by more than 42% year-over-year.

Palmer told analysts that “in light of market volatility,” Stalantis is not currently expecting large production growth in 2022, but will focus more on maintaining price levels as it fights rising raw material costs.

He said the loss of production could be “one touch less” than Stalantis ’2021 revenue forecast earlier.

Arno Antlitz, head of Volkswagen Finance, said the chip shortage “made it abundantly clear to us that we were still not resilient enough to leverage capacity utilization.”

“Although the visibility of the situation is still difficult to predict, we are seeing the beginning of a stabilization of chip supply and hopefully there will be a major financial improvement in the fourth quarter,” Antlitz told reporters.

Volkswagen’s third-quarter operating profit was 2.6 billion euros ($ 3.3 billion), down 12% from a year earlier and less than the 2.99 billion refinance forecast. But the company has set its operating profit margin target of 6.0-7.5% for 2021, with the goal of surpassing Tesla (NASDAQ 🙂 as the world’s largest electric vehicle (EVs) by the middle of the decade.

“Of course, the current volatility brutally demonstrates Volkswagen’s exceptionally high fixed costs, especially in the performance of the VW brand, which seems to bear most of the semiconductor-related deficit,” Berndstein analyst Arndt Ellinghurst wrote in a client note.

Stellantis, formed earlier this year from the merger of Fiat Chrysler and France’s PSA, has confirmed its full-year target for a consistent operating profit margin of about 10%.

Other major car manufacturers including General Motors (NYSE 🙂 and Renault (PA :), also quarterly results hit by chip crunch.

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