LONDON — The global chip shortage is continuing to wreak havoc on the automotive sector, with several of the world’s biggest carmakers blaming the crisis for disappointing financial results this week.
“It was a challenging quarter,” VW CEO Herbert Diess told CNBC’s “Squawk Box Europe” Thursday.
“Our volume brands suffered most because of semiconductor supply,” Diess said, referring to Seat, Skoda and Volkswagen.
In comparison, Porsche and Audi (Volkswagen’s premium brands) have been “quite resilient,” Diess said, adding that they’ve delivered positive results.
With no end in sight, the semiconductor chip shortage is now expected to cost the global automotive industry $210 billion in revenue in 2021, according to consulting firm AlixPartners.
From a geographic perspective, Diess confirmed that VW’s China business has been disproportionately affected.
“China really suffered,” he said, adding that VW lost market share in the country.
The group prioritized its premium brands in China and “compromised” on volume sales, Diess said, adding that the VW brand “suffered a lot.”
The German carmaker cut its outlook for deliveries, toned down sales expectations and warned of cost cuts as it reported lower-than-expected operating profit for the quarter.
Not all bad?
But Diess claimed that it’s not all negative. “The demand side is really good,” he said. “We have filled order books in all areas and our EV [electric vehicle] sales are coming along well.”
“We had to reduce our sales outlook but revenue outlook is still positive and [it has been] significantly growing over the last year,” Diess said. “That means we can keep our margin guidance, which is very important.”
Diess is optimistic that semiconductor supply will pick up in the next quarter, but he still expects to see some supply constraints in 2022.
“We foresee that semiconductors will be bottlenecks in our supply chain,” he said. “There might be others as well, but mostly we will see semiconductor constraints.”
Elsewhere, Stellantis — formed through the merger of Fiat Chrysler and France’s PSA — has also been hurt by the chip shortage.
Like VW, it also missed analyst expectations when it reported its third-quarter results Thursday. It reported a 14% fall in third-quarter revenue on a pro-forma basis after semiconductor shortages cut planned quarterly production by 30%, or 600,000 vehicles.
“The level of chip shortage was probably slightly higher than what we had expected when we last spoke to the market in August,” Chief Financial Officer Richard Palmer said, adding that the full-year total of lost production due to the chip shortage would top a previous forecast of 1.4 million units.
But Palmer said the business has seen a “moderate” improvement on the chip supply situation this month compared to September. He expects the trend to continue through the fourth quarter.
“Visibility on semiconductors continues to be a difficult subject for the industry,” Palmer added.
Analysts at JPMorgan and UBS believe now is the ideal time for investors to increase their exposure to the automotive sector.
“Time to increase the exposure to auto stocks, in our view,” said a UBS analyst team led by Patrick Hummel in a note on Oct. 8.
JPMorgan’s head of European autos equity research, Jose Asumendi, told CNBC Wednesday that he and his team have been telling investors to increase their exposure to autos for around a month.
“We are quite selective in terms of where we see value,” Asumendi said, adding that Daimler, Renault and Stellantis are the bank’s top stock picks among the European carmakers.
GM and Ford
Ford surprised industry watchers Wednesday when it shattered Wall Street’s earnings expectations for the third quarter and it said it has already benefited from improved supply of chips.
Meanwhile, GM CEO and Chair Mary Barra said during a call Wednesday that the automaker’s supply of semiconductor chips is improving, but “it still continues to be somewhat volatile.” She said GM expects the shortage to continue into the first half of next year.
While many car companies have been posting disappointing results, chipmakers have seen their revenues soar as many of them increased the prices of the products.
The chipmaker view
France’s STMicro, which makes chips for the likes of Tesla, delivered strong third-quarter results Thursday and it expects the next quarter to be even better thanks to demand from the automotive market.
“We want to be a leader in the field of automotive,” STMicro President Jean-Marc Chery told CNBC’s “Squawk Box Europe” Thursday.
“We do believe that the situation in 2022 will really improve definitively compared to 2021,” he said, adding that chipmakers were caught off guard when demand for automotive chips peaked at the start of 2021.
“The situation will improve in 2022,” he said. “I expect we will go back to a situation where you will have the right balance between inventory level, acceptable lead times, [but] not before 2023.”
Correction: This story has been updated with the correct name for the president of STMicro.