Volkswagen and Stellantis take financial hit amid chip shortage

Operating profits at VW fall by €500m, while Stellantis reports 14% decline in revenues

The carmakers Volkswagen and Stellantis suffered financial hits in the third quarter of 2021 as the automotive sector continued to struggle with the global shortage of computer chips caused by coronavirus pandemic disruption.

Operating profits at VW, the world’s largest carmaker by output, fell by €500m (£420m) in the third quarter of 2021. It made €2.8bn before one-off items between July and September, down from €3.2bn in the same period last year.

Stellantis, which was formed from a merger of Fiat and Peugeot in January, reported a 14% decline in revenues as it produced 600,000 fewer vehicles than planned because of the chip shortage.

Car companies around the world have been badly hit by the persistent shortage of computer chips, which are made from semiconductor material. As the extent of the pandemic became clear in early 2020, carmakers cut back on orders to chip manufacturers, only to find themselves at the back of the queue when demand roared back.

More computer chips than ever are used in cars to control everything from engines to door locks to autonomous driving capabilities. The problem is particularly acute in carmakers such as VW, which are pushing hard into electric cars, which require even more chips to control lithium ion batteries.

VW said its larger volume brands, including Volkswagen, Skoda and Seat, were worst affected, with shortages particularly acute in China.

In the first nine months of 2021, VW has only been able to raise deliveries by 6.9% to 7m vehicles, even compared with 2020, when lockdowns around the world halted factories and pushed back sales.

Carmakers have warned that shortages will last until at least 2022, and some experts believe it will affect the industry until 2023 as semiconductor companies race to build complex new foundries. Richard Palmer, the chief executive of Stellantis, said there was “continued poor visibility of component supply”.

He said: “The level of chip shortage was probably slightly higher that what we had expected when we last spoke to the market in August.” .

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Herbert Diess, the chief executive of VW, said: “The results of the third quarter show once again that we must now systematically drive forward the improvement in productivity in the volume sector.”

It is not only carmakers that have been badly affected by the chip shortages. Nokia, the telecoms equipment maker that formerly made mobile phones, said the shortage may get worse in last three months of the 2021.

“At the moment, we are limited by semiconductor availability, that will affect [the fourth quarter] and it’s quite possible that this challenge will get bigger before it starts getting better,” Nokia’s chief executive, Pekka Lundmark, said.

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Jasper Jolly and agencies

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