Now, microchip shortage threatens auto industry

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But this time, the bottleneck is more a matter of chipmakers not being able to ramp up quickly enough to keep auto plants humming. As the industry pulled away from the pandemic in mid-2020, chipmakers prepared for a more moderate recovery, according to observers in China. Now, with demand jumping ahead of forecasts, chipmakers are finding it tough to dial up production to keep pace.

China’s new-vehicle output started to recover from the pandemic in April and continued to grow for the seventh-straight month in October, advancing 11 percent to exceed 2.55 million vehicles. In the first 10 months of the year, total production was down just 4.6 percent.

In the first 20 days of November, new-vehicle production in China climbed 9.6 percent to top 1.6 million, according to the manufacturers association. Output of new light vehicles, including sedans, crossovers, SUVs, multipurpose vehicles and minibuses, rose 7.2 percent to nearly 1.4 million in that period.

As suppliers and automakers scramble to secure microchips to feed the growing vehicle output, automakers could be forced to prioritize production of certain vehicles or trim lines at the expense of others.

Volkswagen was among those warning the lag could disrupt output.

“The chip supply for certain automotive electronic components has been affected due to uncertainties caused by the pandemic,” VW said in a statement. “This has led to a potential interruption in automotive production, with the situation getting more critical as demand has risen due to the full-speed recovery of the Chinese market.”

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Saurabh Shukla

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