European car production could grind to a halt as early as the end of next week as a major chip shortage crisis deepens, making it potentially harder and more expensive to buy a car.
In scenes reminiscent of the Covid semiconductor shortage, the automotive industry is facing chip supply issues that could leave it ‘with imminent assembly line shortages’ according to the European Automobile Manufacturers’ Association (ACEA).
Volkswagen Group CFO, Arno Antlitz warned on Thursday that VW only has ‘enough supply’ to last ‘until the end of next week’, having already suspended production of its Golf model due to the shortage.
The issue has been growing in recent weeks since China suspended exports of chips made by Nexperia due to the ongoing political dispute with the US, which saw the Dutch government take control of the Netherlands-based company last month following mounting pressure from President Trump.
But while it will ultimately spell problems for Volkswagen and a number of other European car makers, it is also bad news for anyone wanting to buy a car.
This is because the supply chain problems will not only limit the availability of new vehicles, but in turn could likely trigger a rise in used car prices – a situation already seen after the 2020 pandemic shortages and factory shutdowns.
Data published by the Society of Motor Manufacturers and Traders (SMMT) showed a 108.6 per cent rise in used car transactions in the second quarter of 2021 in response to the new car supply shortages, with average second-hand prices hitting record high levels.
China has suspended chip maker Nexperia’s exports due to the ongoing political dispute with the US, leaving automotive facing semiconductor chip supply issues that could leave it ‘with imminent assembly line shortages’
On 29 October, ACEA Director General, Sigrid de Vries, warned that ‘assembly line stoppages might only be days away’.
Its members – which include BMW, Mercedes, VW Group, Nissan and Toyota – were warning that ‘part supplies are already being stopped due to the shortage’.
The political disputes that have led to the shortages remain unresolved, dispute the ACEA saying ‘all parties to this dispute are working very hard to find a diplomatic solution’.
The situation reared its head in just a matter of weeks.
What’s triggered supply issues?
Nexperia, the semiconductor producer at the centre of the shortage disputes, was acquired by Chinese firm Wingtech Technology in 2019.
The chip maker’s revenue stood at around $2billion in 2024, with around 60 per cent of its products delivered to the automotive sector.
Wingtech was put on the US BIS Entity List in December 2024; business on the trade restriction list are subject to a specific requirements for export.
On 29 September, the US Department of Commerce issued a new rule where a company ‘at least 50 per cent owned by one or more entities on the Entity List or the Military End-User (MEU) List will itself automatically be subject to Entity List/MEU List restrictions.’
Nexperia therefore became subject to same export controls as its Chinese parent company, and just a day later the Dutch government took control of Nexperia due to pressure from the US over intellectual property concerns.
On 4 October, the Chinese Ministry of Commerce (MPFCOM) imposed its own export controls and stopped Nexperia and its subcontractors from exporting components to foreign countries, sparking an internal control war with the Dutch government – of which a resolution has yet to be reached.
The global supply chain crisis this has sparked can’t be underestimated.
BMW, Mercedes, VW Group, Nissan and Toyota, are warning that ‘part supplies are already being stopped due to the shortage’ of semiconductors
The freeze in supply means that these finished products, desperately needed by European car makers to use in the control units of vehicle electrical systems, aren’t being received.
Currently the industry is working through reserve stocks but these supplies are rapidly dwindling.
Alternative suppliers exist but it takes months to build up the additional capacity needed to meet the shortfall in supply.
Volkswagen is one of the companies reliant on Nexperia chips, and so far the most vocal about its stock reserve issues.
On Wednesday, Golf production was suspended at VW’s Wolfsburg plant due to the shortages. Golf alone requires 8,000 semiconductors.
VW only has ‘enough supply’ to last ‘until the end of next week’. VW had already suspended production of its Golf model due to the chip shortage
The worry is that there will be a repeat of the global shortage between 2021 and 2023 which saw car market supply contract and demand in rise. This will not only make it difficult to buy a new car but shoot up used car prices
Volkswagen is now having to find alternative sources for its semiconductors, which is a constant scramble.
‘Vehicle production at the Wolfsburg, Emden, Zwickau, Osnabrück and Dresden sites is secured for the coming week,’ VW said.
However ‘short-term effects on production cannot be ruled out’. Production of the Tiguan, Touran and Tayron, also built at Wolfsburg, will likely be disrupted too.
A repeat of new car shortages seen during the pandemic
The industry is now growing increasingly concerned that there will be a repeat of the global shortage of new motors seen between 2021 and 2023.
Automotive was particularly hard hit by semiconductor shortages, as the pandemic demand for electronic goods, factory shutdowns and Russia’s invasion of the Ukraine – Russia supplies 25 to 30 per cent of the world’s palladium, a rare metal used for semiconductors – on top of the increased cost of transporting semiconductors by air crippled the supply chain.
The shortage of chips also hit when there was pent-up demand for new cars after Covid forced showrooms to close and assembly lines ground to a halt.
With consumer spending sinking to a generational low due to ongoing lockdowns, savings had boomed and demand peaked as people looked to spend once Covid restrictions had been lifted.
But demand quickly outstripped supply as car makers waiting on fresh deliveries of semiconductors.
In September 2021, the world’s largest vehicle manufacturer, Toyota, announced its global output would reduce by 40 per cent after its stockpiled reserves of chips depleted.
A total of 2,167,504 second-hand motors were bought between April and June 2021, up 6.6 per cent on pre-pandemic levels and the second best quarterly performance ever posted
The used car market- while seeing record levels of demand – also saw a significant spike in prices as a result of increased competition.
Drivers were looking to the second-hand market to fulfil their replacement vehicle needs leading to a record number of used cars being purchased between April and June 2021.
A total of 2,167,504 used motors changed hands in the three-month period, up 6.6 per cent on pre-pandemic levels and the second best quarterly performance ever posted.
The demand pushed the average values of used cars up by 14 per cent year-on-year, according to Auto Trader.
CarFinance 247, a UK online motor finance marketplace, reported a 20 per cent rise in the price of vehicles sold via its service.
Previous chip shortages saw used car demand push the average values of second hand cars in 2021 up by 14% year-on-year, according to Auto Trader. This could happen again if the situation isn’t resolved
According to VW’s Antlitz, today’s situation isn’t as bad as it was back then because ‘we have really much more transparency than we had back in the [previous] semiconductor crisis’.
However, the ACEA says it is ‘increasingly concerned by the imminent disruption to European vehicle manufacturing due to the block in supply of foundational microchips that are essential for our members’ manufacturing.’
The SMMT told us: ‘Another semiconductor chip shortage is the last thing the global automotive industry needs.
‘While the sector has made efforts to diversify its supply chains, if not resolved quickly this issue has the potential to severely disrupt vehicle production and market supply.
‘SMMT is actively monitoring the situation and is in contact with members and government to understand the scale of any impact and measures that might be taken to mitigate it.’
The Daily Mail and This is Money has approached Wingtech for comment.
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