VW sees chips crunch continuing into 2023

VW sees chips crunch continuing into 2023

Automotive News Europe — 2022-09-21

Automotive Industry

Volkswagen Group no longer expects the chip crisis affecting the auto industry to end next year, the automaker's chief procurement officer, Murat Aksel, said in an interview with Automotive News Europe sister publication Automobilwoche.

"Overall, the situation has improved, but only in small steps," he said.

"Investments for new capacity are now on track, but there will probably still be a structural shortfall in semiconductors up to and including 2023."

As recently as spring, Aksel had hoped to have the worst of the semiconductor crisis behind him by 2023, but he has now abandoned that hope.

"It's a structural issue that cannot be solved so quickly," he said. "It takes years to build up new capacity."

In addition, experts say there is an additional problem as almost all automakers are deliberately channeling scarce chips into high-margin upper-range models that have even more semiconductors on board. As a result, demand is rising, despite falling unit numbers.

On the other hand, Aksel says the outlook for the cable harness impasse looks significantly brighter as those supply chains are running stably again.

He added that the task force VW set up after Russia's invasion of Ukraine has done an excellent job.

"The success, as we said from the beginning, is that we stand clearly and permanently by our suppliers in Ukraine, but at the same time we are building backup sites in other countries," Aksel said.

He added that while this double capacity creates costs, if the situation in Ukraine gets worse, the company will require the backup sites.

Beyond chips and wire harnesses, Aksel warned of further dislocation across supply chains were likely in the future.

"What we have seen in the supply chains over the past two years is the new normal," he noted. "And with the new geopolitical issues, if anything, it's going to get more complex and challenging."

However, Aksel said VW is also better prepared for this today, which the Ukraine task force helped prove.

"In a similar way, we need to prepare for other problems in the supply chain," he said, explaining VW is investing heavily in early detection.

Aksel also said VW is focusing on building up secondary suppliers who can step in if necessary.

"But that only applies to critical components," he said. "What stops production? Where do I have long lead times to build up a second supplier?"

He added that the dual capacity plan set up for wire harnesses would be kept on hand only temporarily.

"In the long term, you will not always be able to have two sets of cables," he said. "That is not going to work."