Skoda Auto sees more pain from chip shortage in blow to Czech economy

Reuters

Published Oct 07, 2021 08:32AM ET

Updated Oct 07, 2021 10:55AM ET

PRAGUE (Reuters) -Skoda Auto, a Volkswagen (DE:VOWG_p) unit and the Czech Republic's biggest exporter, will "significantly reduce or even halt" production from Oct. 18 until the end of the year due to the global shortage of chips hobbling the automotive sector.

Carmakers around the world are struggling with a lack of semiconductor chips amid a post-pandemic rise in demand, and the disruption is hampering the Czech economy and others in central Europe reliant on the auto industry.

"Not even Skoda Auto is able to avoid this global crisis," Skoda Auto spokesman Tomas Kotera said.

The expected production curbs are the biggest so far in central Europe, and economists said they would lead to a cut in Czech growth forecasts.

Skoda, the backbone of the country's car sector that employs 180,000 workers and makes up quarter of industrial output, has already stocked up tens of thousands of cars finished but awaiting chips. Dealerships are reporting months-long waits for new cars.

Kotera said the firm wanted to focus on getting the backlog of almost finished cars to customers as soon as possible.

Due to Skoda's outage, overall car production should be similar this year to the 1.15 million cars made in the "covid" year 2020, the Czech Automotive Industry Association said.

Previously, the association expected 1.3 million cars to be produced this year.

Skoda, which employs 35,000 and said it remained committed to maintaining jobs, predicted a gradual calming of the situation for chips in the second half of 2022.

The uncertainty in the car industry is becoming a major drag around central Europe, forcing economies to rely more on a rebound in services or household spending to drive growth.

Data on Thursday showed Czech industrial output fell in August year-on-year for the first time since February amid a sharp drop in car production due to extended holidays.

Hungary, where carmakers likes Mercedes and Suzuki have had to limit some production, also saw output growth shrink more than expected because of the car sector. Output in Germany, the region's key trade partner, slumped in August.