VW says supply chain problems are becoming the norm

Volkswagen has warned that supply chain hold-ups are becoming a permanent problem and downgraded its delivery targets citing a lack of parts that has left it with 150,000 unfinished cars.

Europe’s largest carmaker on Friday said it would deliver as many cars this year as last, backtracking from a target of 5 to 10 per cent growth that it had announced in the summer.

“Challenges to our supply chains will become the rule, not the exception,” said chief executive Oliver Blume in his first earnings call since taking over nearly two months ago.

Since early in the pandemic, the automotive industry has been plagued by an undersupply of chips, which are used for vital vehicle control, sensing and safety features.

Rivals Ford and Volvo also highlighted ongoing semiconductor shortages in results this week, with the former trimming its profit forecast and the latter its delivery target.

“There are worrying geopolitical developments, particularly the rise of nationalism and protectionism. This includes growing barriers to technology transfer between the east and west,” said Blume, in reference to recent US sanctions on chip exports to China.

VW said it had now set up a unit to monitor threats to supply chains and improve its forecasting of potential shortages. It added that the semiconductor problems, which have eased since last year, were expected to “improve further” in the fourth quarter.

The company’s share price, which has fallen by a third in the past year, was down just under 3 per cent on Friday morning.

Revenues in the quarter ending September grew to €70.7bn, compared with €56.9bn in the same period last year when semiconductor supply constraints were higher. Operating profits jumped to €4.3bn, compared with €2.6bn last year.

VW said that it would book proceeds of its partial initial public offering of Porsche in the next quarter.

The sports car maker, which this month overtook its parent company as Europe’s most valuable car brand, on Friday reported a 41 per cent rise in group operating profits to €5.1bn. It attributed this to “significantly” higher revenues per car, more sales and beneficial exchange rates.

VW also logged a €1.9bn non-cash impairment charge related to Argo AI, a US-based driverless car venture that it had backed jointly with Ford, which abruptly shut this week.

Blume said VW would continue research and development in the field of autonomous driving with Bosch in Europe and cited its recent €2.4bn investment in Chinese AI chip specialist Horizon Robotics.

He added that VW was currently in talks with a further partner in the race to develop self-driving cars.