Increasing Impact Of Semiconductor Shortage On Medium And Heavy Commercial Vehicle OEMs In Europe

Republished By Plato

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As conditions facing medium and heavy commercial vehicle
manufacturers in Europe have deteriorated, following our August
forecast release, the contours of a revised industry outlook are
emerging. The proximate trigger for the latest shifts is the
summer’s spate of plant stops by semiconductor manufacturers in
Malaysia due to COVID-19. In recent weeks, several European OEMs
moved from managing production lines within the constraints of
semiconductor availability to having to stop production lines
altogether as the supply dried up. Up to 40,000 trucks (above 6 ton
GVW) will not be produced in the third and fourth quarter in Europe
as a result, IHS Markit calculates, and production is not likely to
be made up in 2022 either. Current expectations are that
semiconductor shortages will continue at least through the first
half of 2022.

The impact of semiconductor availability on the industry
remained muted early in the year, but grew heading in to the summer
months. In the first quarter of 2021, Europe’s OEMs saw and felt
the constraints, but only Volvo had to close its plant in Ghent,
Belgium, for a week in February. The second quarter also saw the
Volvo Group with its brands Volvo Trucks and Renault Trucks being
the main ones affected as it had to close for 4 out of 12 weeks.
Furthermore, Ford Otosan in Turkey moved its vacation period from
summer to 30 May to 13 June. Other OEMs like DAF and MAN produced
unfinished trucks that were parked off-site till the arrival of the
missing parts.

With the return from summer vacation, it was expected that the
situation would improve. Instead, it deteriorated, as the shortage
became more pronounced with the halt of semiconductor production in
Malaysia. Most visible was Scania, which had to stop production for
1-2 weeks right after returning from plant holidays, after having
taken an extra week of plant vacation to begin with. CEO Christian
Levin mentioned in a TV interview that daily losses represented
some 500 trucks. Also MAN and Mercedes-Benz informed their
suppliers that they had to stop production. For its part, MAN
production in Austria was expected to run only at 50% for the last
three weeks of September. MAN Germany was also running at a lower
level. At the Mercedes-Benz plant in Wörth, Germany, several major
product lines were stopped, while Unimog continued. Finally, Volvo
also had to shutdown another week in the current quarter, even
though availability of semiconductors for them improved compared to
the second quarter.

Despite the high order books and the high demand, IHS Markit
expects sales to slow as inventories are low and production stops
occur. Traton CEO Matthias Gründler confirmed that a relative
decline in sales for their brands MAN and Scania was already
visible from the end of August and would continue for the rest of
the year.

Our assumptions for the next forecast update have shifted. For
the last quarter of 2021, we now expect the situation to remain
difficult for most of the OEMs. In particular, the introduction of
planned additional shifts and increasing line rates will not
materialize. OEMs will have to manage with stop days and
potentially longer Christmas holidays in December, as the
visibility on semiconductor availability is very short.

As semiconductors have a long lead time, from order to delivery,
we will also downgrade the first half of the year of 2022 in our
next forecast compared to the previous outlook. To make up for the
lost volumes in 2021 and 2022, we forecast that production in
Europe will see faster acceleration in the following years, 2023
and 2024.

Even so, not every manufacturer faces the challenge to the same
degree. Based on recent production actuals, there are also two
major OEMs that have not suffered from the shortages: Iveco and
KamAZ, both of which have been ramping up their production during
the year. Also the bus segment seems unaffected, as it is still
experiencing low demand due to the late roll-out of vaccination
programs across Europe.