Nick Carey

LONDON (Reuters] – A global semiconductor chip shortage caused Volkswagen (DE;) and Stellantis to lose 1.4 million units in third quarter production, Europe’s biggest carmakers claimed on Thursday. But both companies reported early signs of improvement.

Volkswagen AG (OTC-:), Europe’s leading car maker and No.1 in the world, is now Volkswagen AG. 2 lowered its forecast for deliveries and lowered expectations about sales, warning of price cuts after it posted lower-than expected quarterly operating profit.

German carmaker Volkswagen claimed it made about 800,000 less cars than the previous quarter, which is 35% lower than 2020.

Stellantis was the fourth-largest automaker in the world, with a 14% drop in quarterly pro forma revenue. This is due to chip shortages that reduced planned quarterly production by 30% or 600,000.

Richard Palmer, Stellantis’ finance chief, reported that there was a moderate improvement in chip supply during October. He expects this to continue into the fourth quarter.

He also noted that supply chain issues made it difficult to predict the shortage of automotive semiconductors. This has been a problem for the entire year.

Palmer stated that visibility on semiconductors is still a challenging subject in the industry.

After closing down plants last year due to the COVID-19 pandemic, carmakers now have to compete with the growing consumer electronics industry in order for supplies of chip materials.

From a fire at Japan’s chip-making facility to Malaysian coronavirus locksdowns, supply chain woes have only exacerbated the problems in this industry.

Automakers all over the globe have had to reduce or stop production due to a shortage of chips used in brake sensors, power steering, and entertainment systems. This has led to higher vehicle prices.

Arno Antlitz, chief of finance at Volkswagen, stated that “Semiconductor bottlenecks” in the third quarter had made it clear that the company was not resilient to fluctuating capacity utilization. He added that the company should focus on reducing costs and increasing productivity.

Antlitz stated to journalists that, “Even though it remains difficult to predict the situation, we see stabilisation in chip supply” and said key financials would improve during the fourth quarter.

Volkswagen has reported an operating profit of 2.8 Billion Euros ($3.3B) for its third quarter. That’s 12% lower than last year but still higher than the Refinitiv projection of 2.99 Billion. The company is aiming to surpass Tesla (NASDAQ) in the global market for electric cars (EVs). It has confirmed that its 2021 operating profit margin goal of 6.5-7.5%.

Stellantis, a joint venture between Fiat Chrysler France and France’s PSA was established at the start of this year. They have confirmed their full-year targets for an adjusted operating margin of 10%.

General Motors (NYSE 🙂 are other major carmakers Renault (PA) have quarterly results that are also hurt by the chip crunch.