Carmakers signal end of shortages after two years of runaway prices

FILE PHOTO: A technician works on the final inspection of an electric Volkswagen ID. 4 car model at the production plant of the Volkswagen Group in Zwickau, Germany, April 26, 2022. - REUTERS/Matthias Rietschel/File Photo

FILE PHOTO: A technician works on the final inspection of an electric Volkswagen ID. 4 car model at the production plant of the Volkswagen Group in Zwickau, Germany, April 26, 2022. – REUTERS/Matthias Rietschel/File Photo

The world’s biggest car maker is ramping up production after three years of disruption, adding to hopes of cheaper cars and shorter waiting times for drivers.

Toyota, the world’s top car producer, plans to surpass pre-pandemic production levels this year, it said on Monday.

Meanwhile, its closest rival Volkswagen said it expects to return to growth in China, the world’s largest car market and a big source of critical parts.

Car makers have struggled with shortages, particularly of computer chips, since the early days of the pandemic, leading to disrupted production.

For two years, manufacturers complained of a semiconductor supply shortage as consumers working-from-home invested in new gadgets and laptops.

With no letup in demand for new vehicles, car prices soared and buyers had to wait up to a year for delivery.

Now, demand is weakening as the global economy slows. Chips are also easier to come by as tech companies adjust production to reflect the new economic reality.

“Currently, we are working toward a production volume with a ceiling of 10.6 million units for 2023,” Toyota said in a statement, compared to the 9.1m cars it made in 2019. However, it cautioned that it may have to cut its target to 9.54m if the chip shortage returns.

Volkswagen said China’s car market will grow by 4pc to 5pc this year, reaching 23m sales. The Chinese market for electric cars is growing “unbelievably fast,” said Ralf Brandstaetter, the carmaker’s head of China operations.

The sunnier outlook raises the prospect that waiting times could ease and prices may fall.

Tesla last week slashed prices for its cars by up to £8,000, the most ever in the UK. The move dropped the premium brand’s prices to levels more commonly seen among entry-level rivals. The Model 3 now costs less than rivals like the Kia EV6 and Polestar 2, while a Model Y is now just £2,000 more than the cheapest Skoda Enyaq 8

Separately on Wednesday, shares in Apple supplier IQE plunged by a fifth as the Welsh semiconductor company warned that demand for microchips could take a hit this year.

The London-listed company, which makes silicon “wafers” used in electronic chips for smartphones, cars and mobile networks, said it expected customers to begin “destocking” amid a glut in chip supplies. IQE’s technology is understood to end up in products including Apple’s iPhones, among other products.

IQE expects its customers to try and use up their existing stockpiles and mark down their future order. It added that there was uncertainty over future demand.

Shares in Cardiff-headquartered IQE plunged 22pc on London’s junior AIM index.

John Karidis, an analyst at Numis, said: “The financial environment the world is in right now is causing destocking, and all big and relevant players we track expect this to continue.”

Technology giants including South Korea’s Samsung have warned semiconductor demand is falling. Profits at Samsung fell by 69pc in the final three months of last year.

Last week, C C Wei, chief executive of Taiwanese chip giant TSMC, told analysts that the shortages of the last few years were finally easing.

“We expect the shortage to be relaxed quickly,” he said.

Source: https://finance.yahoo.com/news/carmakers-signal-end-shortages-two-173317425.html