Volvo says sales in the second half could fall due to chip shortage

Volvo Car Group cautioned on Friday that sales volumes in the second half of 2021 could decline year-on-year after it was forced to reduce production because of chip shortage.

The automaker, owned by Geely Holding, said sales dropped 10.6% from a year ago in August, despite strong underlying demand, and said the potential fall in volumes in the second half could impact revenue and profit.

“But Volvo Cars’ outlook for the full year 2021 still remains,” it said, referring to a forecast of sales volume and revenue growth with improved profitability to pre-coronavirus crisis levels.

The automaker said supplier shut-downs since mid-July – because of local efforts to limit the spread of the highly contagious Delta variant in South-East Asia – had worsened an already strained supply situation, forcing it to stop production.

The chip shortage, which has hit automakers worldwide, emerges from a confluence of factors as automakers, which closed plants for two months during the coronavirus pandemic last year, rival against the sprawling consumer electronics industry for chip supplies. A factory fire suffered by Japanese chipmaker Renesas this year is also cited as a reason behind the chip shortage.