Chip scarcity continues to wreak havoc on VW and Stellantis

LONDON — The worldwide chip scarcity is continuous to wreak havoc on the automotive sector, with a number of of the world’s largest carmakers blaming the disaster for disappointing monetary outcomes this week.

Volkswagen and Stellantis stated Thursday that the continuing semiconductor scarcity stays a significant downside for them.

“It was a difficult quarter,” VW CEO Herbert Diess informed CNBC’s “Squawk Field Europe” Thursday.

“Our quantity manufacturers suffered most due to semiconductor provide,” Diess stated, referring to Seat, Skoda and Volkswagen.

As compared, Porsche and Audi (Volkswagen’s premium manufacturers) have been “fairly resilient,” Diess stated, including that they’ve delivered optimistic outcomes.

Ad infinitum, the semiconductor chip scarcity is now anticipated to price the worldwide automotive trade $210 billion in income in 2021, based on consulting agency AlixPartners.

From a geographic perspective, Diess confirmed that VW’s China enterprise has been disproportionately affected.

“China actually suffered,” he stated, including that VW misplaced market share within the nation.

The group prioritized its premium manufacturers in China and “compromised” on quantity gross sales, Diess stated, including that the VW model “suffered quite a bit.”

The German carmaker lower its outlook for deliveries, toned down gross sales expectations and warned of price cuts because it reported lower-than-expected working revenue for the quarter.

However Diess claimed that it isn’t all unfavourable. “The demand aspect is de facto good,” he stated. “We’ve got crammed order books in all areas and our EV [electric vehicle] gross sales are coming alongside properly.”

“We needed to scale back our gross sales outlook however income outlook remains to be optimistic and [it has been] considerably rising over the past yr,” Diess stated. “Which means we will maintain our margin steerage, which is essential.”

Diess is optimistic that semiconductor provide will decide up within the subsequent quarter, however he nonetheless expects to see some provide constraints in 2022.

“We foresee that semiconductors might be bottlenecks in our provide chain,” he stated. “There is likely to be others as properly, however principally we are going to see semiconductor constraints.”

Elsewhere, Stellantis — shaped by the merger of Fiat Chrysler and France’s PSA — has additionally been harm by the chip scarcity.

Like VW, it additionally missed analyst expectations when it reported its third-quarter outcomes Thursday. It reported a 14% fall in third-quarter income on a pro-forma foundation after semiconductor shortages lower deliberate quarterly manufacturing by 30%, or 600,000 autos.

“The extent of chip scarcity was most likely barely larger than what we had anticipated once we final spoke to the market in August,” Chief Monetary Officer Richard Palmer stated, including that the full-year whole of misplaced manufacturing as a result of chip scarcity would high a earlier forecast of 1.4 million items.

However Palmer stated the enterprise has seen a “average” enchancment on the chip provide state of affairs this month in comparison with September. He expects the development to proceed by the fourth quarter.

“Visibility on semiconductors continues to be a tough topic for the trade,” Palmer added.

Analysts at JPMorgan and UBS imagine now could be the best time for traders to extend their publicity to the automotive sector.

“Time to extend the publicity to auto shares, in our view,” stated a UBS analyst workforce led by Patrick Hummel in a notice on Oct. 8.

JPMorgan’s head of European autos fairness analysis, Jose Asumendi, informed CNBC Wednesday that he and his workforce have been telling traders to extend their publicity to autos for round a month.

“We’re fairly selective when it comes to the place we see worth,” Asumendi stated, including that Daimler, Renault and Stellantis are the financial institution’s high inventory picks among the many European carmakers.

On the opposite aspect of the Atlantic, U.S. carmakers GM and Ford managed to beat analyst expectations regardless of the chip scarcity.

Ford shocked trade watchers Wednesday when it shattered Wall Road’s earnings expectations for the third quarter and it stated it has already benefited from improved provide of chips.

In the meantime, GM CEO and Chair Mary Barra stated throughout a name Wednesday that the automaker’s provide of semiconductor chips is bettering, however “it nonetheless continues to be considerably unstable.” She stated GM expects the scarcity to proceed into the primary half of subsequent yr.

Whereas many automobile firms have been posting disappointing outcomes, chipmakers have seen their revenues soar as lots of them elevated the costs of the merchandise.

France’s STMicro, which makes chips for the likes of Tesla, delivered sturdy third-quarter outcomes Thursday and it expects the subsequent quarter to be even higher because of demand from the automotive market.

“We need to be a pacesetter within the discipline of automotive,” STMicro President Jean-Marc Chery informed CNBC’s “Squawk Field Europe” Thursday.

“We do imagine that the state of affairs in 2022 will actually enhance definitively in comparison with 2021,” he stated, including that chipmakers have been caught off guard when demand for automotive chips peaked initially of 2021.

“The state of affairs will enhance in 2022,” he stated. “I anticipate we are going to return to a state of affairs the place you should have the best stability between stock stage, acceptable lead occasions, [but] not earlier than 2023.”

Correction: This story has been up to date with the proper title for the president of STMicro.