Mercedes braces for big Q2 shortfall as global chip crisis roils the luxury car market

April 23, 2021, 11:20 AM UTC

Mercedes-Benz parent Daimler AG may not be able make up for second-quarter shortfalls in production arising from freak events at its key chip suppliers that exacerbated a global semiconductor shortage.

Finance chief Harald Wilhelm said second-quarter vehicle sales and output might be weaker than in the first three months of the year as German assembly lines tasked with building the popular Mercedes GLA and GLC crossovers grind to a complete halt next week for lack of parts. 

The cautious outlook for production took the shine off the company’s decision to hike the forecast for full-year profitability at its core passenger car and vans division. Operating returns are now expected to hit 10% to 12% instead of the 8% to 10% projection only two months ago following a blowout first quarter

“Unfortunately, two events occurred in February that pose further challenges for the industry while our supply chains were already tight and our reserve stocks were low,” he told analysts. 

He cited interruptions in the delivery of chips that lasted for about four weeks earlier this year owing to the Texas cold snap that left the state out of power. A fire at its Japanese supplier Renesas Electronics only made matters worse. 

“We assume some recovery in the third and fourth quarter, but at this stage the visibility is limited,” he added. 

Chip shortage was also behind the conservative margin guidance at its commercial vehicles business even as incoming orders for heavy trucks outpaced unit sales by half. 

The Daimler CFO implied that the division, due to be carved out and listed on the stock exchange later this year, might be forced to forfeit revenue this year as a result of the constraints. 

“Again it’s the semiconductor issue. It impacts trucks as well,” he told analysts. “That’s why maybe not all of the commercial opportunities can be materialized, and that’s why we stick with the guidance here.”

Daimler is the latest to suffer from the chip constraint. General Motors closed three big factories and reduced production at others earlier this year as a result of the shortage.

One of Germany’s leading consulting firms, Roland Berger, predicted in a study published earlier this month that the shortage would last into next year as supply remained constrained and demand for chips, such as graphics processors needed in car dashboard displays, vied with those needed to run game consoles or mine cryptocurrencies.