Chip Shortage Paralyzes Auto Manufacturing Globally; These Firms Have Stopped Production

Recently, operations of many of the world’s biggest automakers who have their factories in  Asia, Europe and North America have been suspended due to a persistent shortage of semiconductors which in turn was caused due to the a fire at a key chip-producing plant over the weekend which aggravated the availability of the same.

These semiconductors are used to manage and monitor everything from engine and driving performance to air-conditioning and entertainment system in the vehicles. The supply shortage has affected Ford Motor Co., Toyota Motor Corp., Volkswagen AG and Honda Motor Co.

According to Tatsuo Yoshida, auto-industry analyst currently the production is vulnerable as any kind of abnormal occurrence causes parts to run out.

The Supply Crunch & Where it Started?

Let’s see what all transpired behind the scenes of this shortage. It all started with the sudden increase in demand of semiconductors for the devices like laptops, webcams and gaming systems. This demand was due to the pandemic and the fact that people resorted to these devices to keep them engaged due to the times of being confined to a place. This increased demand caused the chips to be diverted to these industries from the auto industry. This, coupled with the declining automobile sales also resulted in auto companies slashing orders for semiconductors. In addition to this the winter storms in U.S. also affected the semiconductor supplies. To top it all and make the matters worse, a fire damaged the plant run by Renesas Electronics Corp., a top provider of automotive chips.

The global vehicle production would be reduced by 1.5 million units, according to the analysts at Mitsubishi UFJ Morgan Stanley Securities Co.

Latest Stoppages By Automakers:

According to the Seoul Economic Daily, extra work on the weekend has been suspended by the Hyundai Motor Co. in order to adjust production of brands including Kona, Avante, Grandeur and Sonata.

Citing the chip shortage, congestion at ports and cold weather production at six factories in the U.S., Canada and Mexico has been suspended by Honda.

Seeing a “substantial impact” from the global semiconductor shortage stop days across global truck manufacturing operations have been implemented by Volvo AB.

Till March 29, production at a factory in Ohio has been halted and a shift has been dropped in Kentucky by Ford. It is said that once the electronic modules that contain chips are available, F-150 trucks and Edge SUVs will be assembled in North America without certain parts and shipped to dealers.

Production is also being adjusted by Nissan Motor Co. as it is tweaking its operations in the U.S. and Mexico.

After the cold weather in the US, which disrupted chip production, operations at Toyota’s Kolin plant in the Czech Republic have been suspended for two weeks from March 22. It is the same plant which makes the compact car Aygo for the European market

Volkswagen is halting production at a plant in Portugal from March 22-28.

While reviewing the production plans for the month of April, in March Mitsubishi Motors Corp. is reducing domestic output of vehicles by 4,000-5,000 units.

The S&P Supercomposite Auto Parts & Equipment Index is down 10% from a March 17 peak. This week, share prices of all of the automakers, with the exception of Volkswagen, have fallen.

On Sunday, during the online news conference CEO Hidetoshi Shibata said that the decision by Renesas to halt a production line for 300mm wafers for at least a month will have a huge impact on the auto industry. Toyota and Nissan, after reviewing the severity of the production crunch, have decided to dispatch workers to help in recovery efforts.

Any incident that impacts automotive industry in Japan, impacts the whole economy in a broad sense, said Roman Schorr. He threw light on the disproportionate reliance on one factory.

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