The CEO of Volvo: Semiconductor Supplies Are ‘Fully Restocked’ for Us

Over the last couple of years, the automotive sector has been dealing with a chip scarcity due to various issues, mostly related to the effects of the COVID-19 pandemic on consumer needs. As carmakers struggled to produce vehicles at scale for profit, they focused on maximizing profitability per unit to stabilize their finances during this period. However, their financial situation suffered, and production volumes continued to decline into 2022. For instance, General Motors had close to 100,000 unfinished vehicles waiting for chips as of July 1, as reported by Reuters. Fortunately, signs are now indicating that the shortage is starting to ease, according to Volvo’s Rowan, who announced on Wednesday during the segment on CNBC‘s Squawk Box Europe that their chips are now “fully restocked.”

“In the first quarter, we faced challenges due to a specific semiconductor affecting production across most of our range,” stated Rowan. “Our forecast indicated that we would overcome this by the end of the second quarter, and that is what we have observed. We have resolved those semiconductor issues.”

“Now that the lockdowns in China are in the past, we have restored full chip supplies—for Volvo Cars, at least,” he added.

Volvo Cars mentioned in an earnings report that they have witnessed a “significant improvement in stabilizing their supply chain, with production rebounding strongly in June.” While an improvement in a single, relatively smaller automaker might not signify a complete recovery across the industry, there are indications that the provision of automotive-grade chips might see a revival. According to data from Electronics Engineering Journal referenced by Kelley Blue Book, the production of low-power automotive chips is anticipated to grow by around 14% compared to 2020 levels by the end of 2023. Most of this increased supply is expected to reach automakers before the conclusion of this year.

Although an increase in chip production capacity won’t immediately resolve the shortage, as the additional chip supply will require time to reach automakers and then consumers, the effects of increased chip supplies will be felt gradually. A return to the previous level of normalcy may not happen swiftly. The era of low-priced new cars may be a thing of the past.

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