Monday 29 November 2021
Chip crisis: suppliers suffer
Car manufacturers cannot celebrate despite winning
The demand is great, the prices are high: the world’s largest car companies can significantly increase their profits in the third quarter. But the future doesn’t look bright. Corona and semiconductor crisis are affecting the industry. Many suppliers are in a “financially difficult situation”.
Delivery bottlenecks and the lack of chips are forcing automakers worldwide to temporarily stop the production lines – but the world’s 16 largest automakers have recently made more profits than ever before. As the analysis company EY announced, the operating profit of these companies climbed in the third quarter by over eleven percent to almost 23.1 billion euros. That is a “new record level”.
In terms of sales, the companies recorded significant losses of 16 percent – 13 manufacturers sold fewer cars than in the same period of the previous year, explained EY. The total turnover of the 16 companies therefore shrank by 1.6 percent to 371 billion euros. Nevertheless, the top car companies, including VW, Daimler, General Motors and Honda, have “survived the semiconductor crisis remarkably well”, explained the EY experts: the scarce chips are mainly installed in “high-priced, high-margin vehicles”.
In addition, the demand is greater than the supply – discount campaigns by manufacturers are therefore not necessary. “The industry has not seen such good price enforcement for a very long time,” said EY industry expert Constantin Gall. “Even if the semiconductor crisis eases in the course of the coming year, prices are likely to stay up for a while.” The majority of the companies examined were able to increase their market value in the course of the year. Since the beginning of the year, according to EY, there has been an increase of 41 percent to a total of two trillion dollars – with the US electric car manufacturer Tesla alone accounting for one trillion.
But there is one downer: while the aforementioned large automakers made record profits in the past quarter, according to the management consultancy PwC, only 24 percent of their suppliers are financially solid. 42 percent, on the other hand, are “now in a financially tense situation,” said PwC. The chip crisis is slowing down your transformation to electromobility. The consultants examined 494 suppliers from 35 countries.
“At the moment everyone is driving on sight”
In the summer, carmakers and suppliers benefited from catch-up effects and the increasing demand for e-cars, said PwC industry expert Thomas Steinberger. In the meantime, the automakers have ramped up their orders out of concern about the supply chains. “However, these are currently not being accessed because the car manufacturers are only able to deliver vehicles with a delay due to the lack of chips,” explained Steinberger. Now suppliers are struggling with excessive inventories and rising raw material and energy prices. Your economic situation is getting worse and worse. “If the situation does not relax soon, many suppliers will feel compelled to initiate further and tougher restructuring measures,” said Steinberger.
Despite the profits, there is no party mood among the car manufacturers: “On the contrary,” said EY partner Peter Fuß. Even companies that previously had sufficient semiconductors are likely to increasingly feel the effects of material shortages and price increases. Corona could lead to further production downtimes and logistics disruptions. “In addition, the current situation presents the suppliers with enormous, sometimes existential, difficulties – and ultimately manufacturers and suppliers are in the same boat, the manufacturers are dependent on solvent suppliers,” said Fuß.
In all markets, sales collapsed in the third quarter – but especially in China, where German manufacturers sold 31 percent fewer cars. China’s share of its sales shrank for the first time since 2015, from 39.4 to 38.2 percent. In China, “we are currently seeing particularly clear effects of the chip crisis,” said Fuß. The car companies could now only react to a limited extent to the shortage of materials. Long-term contracts and different storage strategies left little room for maneuver, said Gall. “At the moment everyone is driving on sight.” In future, however, reliable partnerships with suppliers should be more important than “getting the last bit of cost optimization out”.