Pratima desai and Victoria Waldersee

BERLIN/LONDON – European automakers are reeling under a chip shortage. They have tried in recent days to assure shareholders, that there is no imminent threat to production.

Car part suppliers and associations for the industry warn that automakers may face significant shortfalls if China’s production, which makes up 85% global magnesium supply, doesn’t pick up soon.

Magnesium can be purchased from suppliers, but car manufacturers don’t usually buy large amounts of it. Part manufacturers that provide key components to automakers are highly dependent on magnesium. This can be combined with or by itself, and it is possible to decrease the vehicle’s weight.

It is especially useful to make vehicles lighter for increasing the range of electric cars, which is crucial in Europe’s plans for energy transition.

New cars are often delayed by chip shortages. Sometimes, even up to a whole year. An auto industry source stated that these queues may grow if China does not make rapid magnesium exports.

Stellantis Auto and BMW both claim they don’t see any shortages. Some in the industry believe their stocks and magnesium in transit will keep them going until 2022.

In an earnings call, Volkswagen (DE)’s chief of purchasing stated that a shortage was to be expected.

Murat Aksel, Volkswagen, stated that it was impossible to predict if the magnesium shortage, which is expected to occur according plan, would be worse than the semiconductor shortage.

According to industry sources, China has a magnesium production of about half its normal level. This is due to soaring energy prices and rationing that pushed smelters into cutting or closing down their operations.

China allowed some magnesium producers in China to restart production, although not enough to alleviate the shortage. Although prices have fallen from their January record highs, they remain more than twice as high as in January.

Jonathan O’Riordan (head of Europe’s auto manufacturer association ACEA) stated that “we are very worried this will impact us in a few weeks.”

ZF Germany, which makes gearboxes for steering wheels and drives them with magnesium, said to Reuters that it is looking at other sources but the Chinese shortage was not enough.

Teresa Schad spoke for WV Metalle, Germany’s metal association. She said, “It is the calm before it storm.”