VW loses tens of thousands of cars in China on chip shortage

Volkswagen AG has lost tens of thousands of cars in production in China due to the global chip supply shortage that’s crippling automakers around the world.

“It was hurting us already in December and we lost some 10,000 cars since then simply because we lost 50,000 cars in production in December because of some chips,” VW’s China head, Stephan Wollenstein, said during an online media briefing Wednesday.

Wollenstein said the chip shortage is mainly impacting models using the carmaker’s Electronic Stability Program, a system of sensors that works with a car’s Anti-lock Braking System to prevent the wheels seizing up after an unexpected swerve. Some other components may also be affected, he said, without providing further detail.

“You see how vulnerable our industries are if only one chip is missing,” Wollenstein said. “This will unfortunately continue in the first quarter.” The company is in the process of contacting chipmakers worldwide to better shore up supply.

China is a critical market for the world’s biggest carmaker, with VW’s sprawling Chinese operations accounting for about 40% of global vehicle deliveries and a large chunk of profits. The German group on Tuesday set the starting price of its first locally built all-electric sports-utility vehicle with its Chinese partner FAW Group Co. at 199,900 yuan ($30,800) after subsidies, marking a play for the mass market as a growing number of automakers jostle for share in Asia’s biggest economy.

VW in China delivered 3.85 million cars in 2020 together with its local partners, down 9.1% on 2019’s figures due to the coronavirus pandemic. Rainer Seidl, the executive vice president of Volkswagen Group China who’s responsible for finance, said Wednesday the outlook for this year was more positive, with growth expected to be in line with GDP, which market watchers put at around 8%.

Carmakers around the world have been hit in recent weeks by a worsening global semiconductor shortage that’s led to production cuts and staff layoffs. Wollenstein said he hoped the shortage would end by March but warned it may persist into the second quarter.

Having launched the ID.4 Crozz in China on Tuesday, VW is now planning to unveil the pricing of another ID.4 model built with a separate local partner, SAIC Motor Corp. While models from Tesla Inc. and Chinese EV startup Nio Inc., which also makes premium cars, may pose challenges for Volkswagen’s Audi brand, its ID range targets the masses and the first is about 40% cheaper than Tesla’s Model Y.

Tesla began delivery of its made-in-China Model Y SUV earlier this month. It sold 23,479 of its lower-end Model 3 sedans in December, data from China Automotive Information Net show.

“We aim for cars for millions, not for millionaires,” Wollenstein said.

©2021 Bloomberg L.P.