Volkswagen China May Suspend Production of Some Types of Cars Due to Chip Shortage

A chip shortage could disrupt auto production in China, industry officials said Friday. China's largest foreign automaker, Volkswagen, said that overall car production in the country could be halted after the global supply of chips for some electronic components was disrupted.

Cars are becoming increasingly dependent on chips for everything from computer-controlled engines for better fuel economy to driver assistance features like emergency braking. However, due to the COVID-19 pandemic, chip production has been slowed at the very time that the demand for personal vehicles has increased, as Chinese residents try to avoid public transport.

Chipmakers have already reacted to the situation by preparing to increase production, however, it will take some time, which will create problems for automakers who depend on them, according to Reuters.

"Although semiconductor manufacturers have already responded to the unexpected demand with capacity expansions, the required additional volumes will only be available in six to nine months," Continental said on Friday. "Therefore, the potential delivery bottlenecks may last into 2021."

Germany's Infineon Technologies AG said it was increasing its investments to ramp up a new chip factory in Austria. "We have already factored in certain growth for car production in 2021. Accordingly, we will adjust our global manufacturing capacities," the company said in a statement.

Automotive chip supplier NXP Semiconductors told customers it was raising prices on all products because it faced significant increases in material costs, and an acute shortage of chips.

Volkswagen, China's largest foreign automaker, said on Friday that overall car production in the country could be halted. "The chip supply for certain automotive electronic components has been affected due to uncertainties caused by the pandemic," a Volkswagen representative told Reuters in an emailed statement.

Bosch said it also sees bottlenecks in the supply chain of some components. "No supplier can elude this market development. We are in close contact with our suppliers and customers to maintain the supply chains as much as possible despite the tense market situation," Bosch said.

A senior industry official, who declined to be named, told Reuters he expects chip shortages to continue to affect car production in China. As a result, several international and local auto companies will face production disruptions in the short term.

Volkswagen said it is monitoring the situation closely and has already begun to coordinate with suppliers to take appropriate countermeasures.

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