Automakers are feeling the chip crisis easing as global economic growth slows

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The global semiconductor shortage that has stalled the auto industry for almost two years is showing signs of easing, at least for now.

Mercedes Benz AG, Daimler Truck Holding AG and BMW AG are among the automakers that, after months of crippling outages, are now getting enough of the high-tech components to produce at full capacity.

The breakthrough comes sooner than companies predicted and marks a bright spot for an industry grappling with a deteriorating economy and inflation while managing a historic transition to electric vehicle production. Manufacturers are cheering the improvement in chip offerings, but are yet to announce a win.

“We’re still observing it week after week, but so far we’ve basically had no problems with ongoing production worldwide,” said Joerg Burzer, Head of Production and Supply Chain Management at Mercedes. There are supply problems “here and there,” he said, “but nothing compared to last year.”

Even as demand for cars boomed, automakers had to scale back production because factories around the world could not source enough chips, which are critical to increasingly computerized vehicles. The outages were so severe that global car production showed little sign of recovering to pre-pandemic levels.

As chip supply improves, automakers are working off their backlogs and concerns are centered on how consumer demand will hold up amid accelerating inflation and higher interest rates. Tesla Inc. chief executive officer Elon Musk said the electric-car maker has to cut staff by 10% and has a “super bad feeling” about the economy, according to Reuters, citing an internal memo.

But not everyone is as pessimistic as Musk. According to a survey by the Ifo Institute in May, the mood among German carmakers has improved significantly. The survey showed growing confidence among automakers that they will be able to raise prices to cope with rising raw material costs.

Part of the new availability of chips is due to the weaker economic outlook and inflation, which has reduced demand for consumer electronics that also use the components. Karin Radstrom, head of Daimler Trucks’ Mercedes brand, said the company is now getting the chips it needs to clear an order backlog.

“It’s not perfect, but it’s better than last year,” Radstrom said in an interview. “I try not to celebrate too soon. We continue to monitor the situation closely.”

BMW was similarly cautiously optimistic, saying all plants are operational and the company is not experiencing any disruptions due to chip shipments.

“The situation is currently somewhat more stable,” said a spokesman, adding that BMW continues to monitor the chip supply on a daily basis and does not rule out new disruptions in the coming weeks and months.

Volkswagen AG, which like others assumes that the blockade would ease in the second half of 2022, also sees a stable supply, according to a spokesman who emphasized that there are still considerable uncertainties in the coming months.

Harry Wolters, President of Paccar Inc.’s DAF Trucks Division, has observed the same trend.

“We’ve seen better delivery of components than we expected maybe five, six weeks ago,” Wolters said. “This has allowed us to increase build rates in the US and Europe.”

But not all companies enjoy the same relief. Volvo Trucks said it still sees limited chip availability and expects production to be impacted in the second quarter. And according to research by Susquehanna Financial Group, lead times for chips — which are used in a range of electronic devices — remained flat in May, a sign delays linger.

Mercedes boss Ola Kallenius said last year that his company would use more expensive semiconductors to avoid the shortage. Ford Motor Co. chief executive officer Jim Farley said last month the company will buy chips wherever it can on the open market.

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