Daimler Expects Chip Shortage To Extend Into 2022

The maker of Mercedes-Benz vehicles Daimler AG expects the global shortage of semiconductor chips to hit the car sales of the company till the second half of the current year and even into the next year. However the auto company did not change its outlook for its profit margins for the current year.

A global semiconductor chip shortage had forced Daimler to cut back on production just like a large number of other auto makers. The global shortage started during the Covid-19 pandemic. The chip shortage had also prompted the German auto company to focus on manufacturing and sale of its high profit margin models only.

Even though the company expects to see the global chip shortage to extend to 2022, it believes that the impact will not be as severe as this year, said the company’s Chief Financial Officer Harald Wilhelm while interacting with investors.

Its visibility into how chip supply would develop was currently low, said the company that makes premium cars even as the company faces the challenge of high prices for steel, copper and aluminium in the second half of 2021.

“Improving supply visibility is a top priority for us,” Chief Executive Ola Källenius told a conference call with analysts and investors, although he said the chip shortage “is a fixable problem.”

The global chip shortage happens at a time when there has been resurgence in demand for cars following the pandemic slump in line with the global economic recovery which jacked up prices of both new and used vehicles because of dwindling inventories.

One of the ways to circumvent the problem as found by some auto companies is to temporarily dropping some features from their models. For example, some pickup trucks from General Motors Co were not fitted with a fuel management module which affected the fuel economy performance of the vehicles, the company had announced in March.  

Other another strategy for other car makers is to get the rest of the car prepared and wait till chips are received to complete the vehicles. Daimler is among this lot.

“We have some unfinished cars, but we have not let this balloon out of proportion,” Källenius said.

There was a 27 per cent jump ion sale of Mercedes-Benz car in the second quarter with a 54 per cent jump in Europe – the second largest market for the brand after China.

The growth in sale of Mercedes-Benz in China was just 5.8 per during the second quarter after a massive growth in sales in the previous quarter and in late 2020.

Källenius said order books for the flagship S-class sedans were “very healthy”. But the issues with supply chain “are holding us back”, he said,

The sales for the entire year was expected to be in in line with 2020 levels, the company said, even though the company had previously forecast that the sale this year would be significantly higher than last year.  

Daimler said 2021 adjusted profit margins at its truck and bus division would be between 6% and 7%, which is below its previous forecast for a range of 6% to 8%.

(Adapted from Reuters.com)


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