VW Sees Supply Chain Woes Continuing for the Rest of the Year

Last Updated: November 1, 2022By Tags: ,

VW Group posts €4.3 billion earnings in the third quarter, compared to €2.9 billion in the same quarter in 2021.

The automaker sees supply chain pressures continuing through the end of 2022, with the fourth quarter expected to be “especially challenging.”

Semiconductor supply issues are not seen as diminishing by the end of 2022, despite more optimistic forecasts a year prior, while energy supply issues mount ahead of 2023.

If there were once hopes in the industry that supply chain issues related to computer chips would improve by the second half of 2022, those hopes have now seem to have faded as automakers enter the final stretch of the year. And there is little optimism to be seen.

Recapping its third quarter results with new CEO Oliver Blume at the helm since September, Volkswagen offered a mixed outlook through the rest of the year while dialing down earlier forecasts. The automaker now expects 2022 to be a lot like 2021, as it continues to deal with persistent bottlenecks and supply chain constraints.

The VW Group reported earnings of €4.3 billion in the third quarter of 2022 compared to €2.6 billion during this period last year, but some of the same challenges the automaker faced in 2021 appear to have cemented into place.

“As a result of the structural undersupply of semiconductors, the 2022 financial year will continue to be burdened by supply bottlenecks. We expect the supply of semiconductors to improve further in the fourth quarter,” the automaker noted.

A generous variety of events created significant headwinds for the automaker in this quarter alone.

VW, along with Ford, dropped its investment in Argo AI, shutting down the autonomous tech developer, while issues at VW’s in-house software division Cariad remained at the top of the agenda for the final weeks of 2022. Problems at the software division were seen as one of the factors that ended the tenure of Volkswagen’s previous CEO, Herbert Diess, with the unit seen as having delayed crucial vehicle launches.

Expenses related to the Porsche IPO seem to have borne fruit for Porsche, but not for VW stock. Volkswagen also took a financial hit as it closed down its operations, but not sales, in Russia. The automaker estimated the non-recurring costs for these two events at €1.6 billion, while cessation of its Argo AI backing generated a €1.9 billion non-cash impairment charge.

Despite the end of Argo AI, the automaker intends to continue its development of Mobility as a Service (MaaS) programs, albeit with another partner.

Photo: AFP

“In the course of the cooperation with another partner, the collaboration within the group to develop highly automated and autonomous driving will also be strengthened,” said Christian Senger, member of the Volkswagen Commercial Vehicles brand board of management.

Still, despite these negatives, there were a few bright spots in the past three months for Wolfsburg.

Production of the VW ID.4 began in Chattanooga, Tennessee. VW also penned an agreement with Canada to explore options for supplies of raw materials for battery production in Europe.

Porsche stock, meanwhile, has seen significant gains in the month since its debut, upstaging VW stock in the process.

“In view of the huge challenges arising from the strained supply situation we must continue with our systematic efforts to reduce costs over the coming months and to raise the quality of our operating result,” said Patrik Andreas Mayer, CFO of the Volkswagen passenger ars brand.

“The fourth quarter will be especially challenging with regard to global supply chains and parts supplies,” Mayer added

Still, VW remains held back by far more tangible issues that don’t have much to do with the stock market, even as deliveries of EVs in China have surged over the past three months.

Despite the surge in demand for electric models, the group’s order bank now stands at 350,000 cars.

Whether these bottlenecks will resolve in the new year remains to be seen, just as an energy crisis gathers on the horizon for all European automakers.


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