Volkswagen warns of production halts amid Nexperia chip dispute

Volkswagen told its employees on Wednesday that production stoppages could occur due to supply chain issues with chip products.

The situation highlights how a dispute involving Chinese chip manufacturer Nexperia threatens the European automotive sector.

Automotive industry organizations had raised alarms about potential impacts on production after the Dutch government took control of Nexperia last month, citing intellectual property concerns.

China, in turn, has restricted the export of finished products needed by European car manufacturers.

A company spokesperson told Reuters that VW sent an internal memo to its employees stating that the chip shortage has not yet affected production.

“However, given the dynamic situation, we cannot rule out the possibility of production being affected in the short term,” the spokesperson added.

The German newspaper Bild had reported on VW’s internal memo. The Bild report, citing sources familiar with the plans, stated that production was planned to be halted from next Wednesday due to the problems, which would first affect the Golf series and then other models.

The Volkswagen spokesperson declined to comment on “speculation” about the Wednesday halt, adding that the company is monitoring the situation carefully.

Volkswagen announced it would temporarily halt production of its Golf and Tiguan models at its main factory in Wolfsburg on Friday to deal with an unrelated inventory issue.

The company stated that these measures have no connection to the chip supply issues.

Bild also cited unnamed sources stating that Volkswagen has begun talks with labor officials about a state-supported reduced working hours plan that could affect tens of thousands of employees.

This dispute adds an additional burden to the global trade tensions affecting European car manufacturers and suppliers, including high US import tariffs and China’s restrictions on rare earth element exports.

Nexperia chips, mostly produced in China, are technologically simple but are used in large quantities in car manufacturing.

BMW and Mercedes announced they are working with suppliers to secure their production following the Nexperia impasse.

The Dutch and Chinese economy ministers met on Tuesday but failed to find a solution to the Nexperia impasse.