Global chip shortage: How it affects you

Published: 18 August 2021

► The car industry is facing another crisis
► A global chip shortage has forced several brands to slow production
► Everything you need to know

In the last 18 months, the car industry has had to weather the uncertainty of Brexit and a global pandemic – but there’s one further crisis that’s been causing deep, deep problems in 2021: the global microchip shortage. What started as an inconvenience for those looking to buy a PlayStation 5, Xbox or TV has now made its way to the car industry.

The lack of chips means carmakers such as Jaguar Land Rover, the Renault-Nissan-Mitsubishi Alliance, Stellanis and the Volkswagen Group have been affected by supply issued leading to temporary shutdowns at some plants. Our latest round-up shows that the crisis shows no sign of subsiding, with some companies affected for more than others.

In the UK, sales of new cars are slowing down as supplies of new cars dwindle and waiting list grow. It's no coincidence that used car sales are booming at the moment...

What and why is it happening?

The chip shortage is a triple-pronged problem, though the cause of two prongs can be traced back to coronavirus. Just like the car industry, the semiconductor industry was forced to partially shut down because of the pandemic, resulting in a smaller supply of chips than usual.

And at the same time, the need for tech for home working, as well as the launch of two new gaming consoles – the PlayStation 5 and Xbox Series S/X – meant demand for those chips was higher than ever. And yes, those consoles will have made a splash – Sony estimates it sold 4.5 million units last year alone. 

Finally, a fire at the Renesas Electronics factory – one of the largest semi-conductor makers for the automotive industry – plus a trade war, and severe weather in Texas haven’t helped matters, either.  

Just how bad is it?

Cars are all now so technologically advanced that the crisis is affecting almost every manufacturer. However, not all car brands have made statements yet. But the global industry consulting firm AlixPartners has already predicted that it's going to be bad. It had originally estimated at the start of the year that the shortage will cost carmakers $61bn (£44bn), but has adjusted that to $110bn (£80bn).

AlixPartners added that carmakers are expected to sell about 80.7 million new cars this year, which is down from an earlier estimate of 84.6 million. 


Mercedes-Benz's parent company Daimler reduced the hours of up to 18,500 staff in its Bremen and Rastatt plants, which resulted in a halt in production, between 23-30 April. But it's a situation that's going to affect Mercedes-Benz for months to come. 

The company has needed to cut back production in 2021, and this could continue into 2022. Chief Executive Ola Källenius told Reuters: 'Improving supply visibility is a top priority for us, and the chip shortage is a fixable problem.'

Mercedes-Benz has a problem with vehicles it has built but are still waiting for their chipsets so they can be completed. Källenius added: 'We have some unfinished cars, but we have not let this balloon out of proportion. Orders for the S-class are very healthy, but supply chain issues are holding us back.'


Ford’s UK component factories have been affected and its Otosan plant in Turkey was shut down as a consequence. Earlier in 2021, the company reported that it would produce 1.1 million fewer vehicles than expected. As reported by the FT, the company predicted a shortfall of 200,000 to 400,000 for Q2, but slick management made the best of it.

Profits for the second quarter of 2021 fell by 50% to $561m (£481m), and that was due directly to the a global chip shortage.

The Blue Oval is more optimistic about production for the year. 'We really leaned into allocating chips to our higher profit vehicles,' said John Lawler, Ford’s chief financial officer. 'Pricing remained very strong, much higher than we thought it would.'

Jaguar Land Rover 

Jaguar Land Rover has seen its production seriously dented in 2021. Back in the spring, it issued a statement that confirmed, ‘we have adjusted production schedules for certain vehicles which means that our Castle Bromwich and Halewood manufacturing plants will be operating a limited period of non-production from Monday 26 April. We are working closely with affected suppliers to resolve the issues and minimise the impact on customer orders wherever possible.’ 

The company set up a task force to limit the damage from the chip shortage, which it describes as a 'full-time mission control center' to manage the issue, Chief Financial Officer Adrian Mardell confirmed. As well as that, and dealing with third-partly suppliers more directly, JLR is prioritising production of its most profitable models.

Unlike many of its rivals, Jaguar Land Rover reckons that the global chip shortage will start to ease off in the second half of 2021.

Renault-Nissan-Mitsubishi Alliance

Renault's Chief finance officer Clotilde Delbos originally told the FT early in 2021, ‘We don’t want to give any estimates that might be wrong very quickly. Two months ago, we said we think the peak will be in the second quarter, but we think there will be a lingering effect in the third quarter if not further. The visibility is deteriorating.’ 

Renault has subsequently upped its estimate by August 2021 for lost car production, blaming the supplies of global chip shortage, but adding that rising material prices are also seriously affecting profitability. The company reckons that the situation could result in the loss in production of 200,000 vehicles in 2021, and not ruling out that it could affect production in 2022.


Stellantis, the supergroup that includes Citroën, Peugeot, Jeep and Chrysler, has also been affected by the chip shortage – and has even begun to replace parts on certain models to get around it.

The group has revealed it had changed digital speedos on new 308s to traditional analogue units – though the change only kicked in for vehicles arriving in May. But as Reuters reported, Stellantis CEO Carlos Tavares confirmed that the situation is going to drag on.

He said: 'The semiconductor crisis, from everything I see and I'm not sure I can see everything, is going to drag into 2022 easy because I don't see enough signs that additional production from the Asian sourcing points is going to come to the West in the near future.' Tavares added that Stellantis will prioritise its chip supplies for the most profitable cars. 


Tesla was initially affected by the chip shortage, with CEO Elon Musk describing Q1 2021 as having ‘some of the most difficult supply challenges we’ve ever experienced.’ But the automotive maverick flown in the face of the rest of the industry by turning around the situation successfully.

Model 3 sales are stronger than ever. 'Supply chain challenges, in particular global semiconductor shortages and port congestion, continued to be present in Q2,' a company statement said. 'The Tesla team, including supply chain, software development and our factories, worked extremely hard to keep production running as close to full capacity as possible.'

And the result is that Tesla's quarterly profits exceeded $1bn for the first time. The company said it was able to grow its operating income mainly by increasing volume and reducing costs. However, revised Model S sales won't start in the UK until 2022 as the firm concentrates on the Model 3.


Like Tesla, Toyota is weathering the storm very well indeed. The company posted record sales in June, with production unaffected by the global chip shortage. Toyota has plentiful stocks of semiconductors and anticipates there being no issues for the rest of 2021.

Volkswagen Group

At its annual press conference earlier in 2021, CEO Herbert Diess revealed Volkswagen Group was unable to build 100,000 cars due to the chip shortage in 2020 – and that number wouldn’t be clawed back in 2021, either.

Just weeks later, VW's boss described the car maker as in 'crisis mode', and predicted the semiconductor shortage will seriously impact profits in Q2 of 2021. More flesh on the bones of the crisis was added in a statement, stating that, 'the impairment from the shortage of semiconductors has shifted and will more likely lead to impairments in the second half of the year.' In other words, the shortages will continue throughout 2021, and probably impacting sales into 2022.

How long until things are back to normal?

It's the question we always seem to be asking nowadays. First, it’s worth taking a look at the console market, as it’s one of the most chip-sensitive industries that exist and one of the first to be affected. 

The general consensus is that the PS5 and Xbox Series X will only be simple to buy in late 2021 and early 2022 – and that serves as a good guide for the industry as a whole. Although production issues may not be as acute in a few months as they are now, it’s likely we won’t see true normality until well into next year. 

By Keith Adams

Devout classic Citroen enthusiast, walking car encyclopedia, and long-time contributor to CAR