Are chip shortages the next problem for European autos?

ARE CHIP SHORTAGES THE NEXT PROBLEM FOR EUROPEAN AUTOS?

Citi strategists are warning in a Friday note that shortages of chips could cause downgrades for European light-vehicle production in the fourth quarter and potentially cloud the picture for suppliers in Q3.

It's all to do with the situation at Chinese-owned computer chipmaker Nexperia after the Dutch government announced on Sunday that it had, as of September 30, taken control of the company citing worries about the possible transfer of technology to its Chinese parent company, Wingtech. 600745.

An industry association warned on Thursday European carmakers could face significant disruption to manufacturing without a swift resolution to the dispute, and Citi reckon they have reasons to worry.

"Nexperia is one of the largest makers of basic chips used in cars and consumer electronics, and without these chips, EU auto suppliers arguably cannot build the parts and components needed to supply OEMs, thus threatening production stoppages," they write.

They think current stocks can only last a few weeks, and it could take months to get approvals for news suppliers and for them to ramp up production.

While Citi say "it’s too soon to forecast any potential material downgrades to 4Q25 LVP (light vehicle production) in Europe, nonetheless, the issue could present a new supply risk."

"Since cars can only be produced at the pace of their slowest components, any downward trajectory on LVP poses risks to suppliers like Forvia FRVIA , Valeo FR and OPmobility OPM following months of LVP upgrades.

(Alun John)

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