Skoda Auto production line

William Malcolm

Skoda Auto Faces Cash Crunch Due To Chip Shortage

Škoda Auto, as well as other world car manufacturers, is struggling with the lack of chips that are needed in the onboard electronics of cars. Due to this, Škoda cannot complete a number of cars directly on the line. The company has a maximum limit of 50,000 unfinished cars, a higher number would jeopardize the company’s cash flow and liquidity. That is why the company prefers to cancel shifts, Jaroslav Povšík, chairman of the corporate council, told today’s Hospodářské noviny (HN).

“We can store anything. We can always rent field parking lots or aviation club plots. When we exceed 50,000 cars, it starts to run into our cash flow and liquidity. That’s why we prefer to drop shifts,” Povšík told HN.

According to Povšík, the company currently has 40,000 unfinished cars. When the number of unfinished cars starts to approach 50,000, Škoda begins to cancel shifts. “And since we don’t produce anything, we don’t increase the numbers. And in the meantime, we take stored cars from the package and finish what we can. So far, we have never approached the critical phase of 50,000,” Povšík said.

According to him, Octavia is a crisis model. “We are sacrificing the Octavia because of the other models we have to prefer. We need to get the Enyaq first on the market as our premium and first fully electric car with a high margin,” said the union leader. Preference is given, for example, to the new Fabias and high-margin cars, including the Enyaq IV, Kodiaq, and Superb. According to Povšík, the production of a new car may be delayed by up to 90 days due to chip problems.

The company is now bothered mainly by the lack of chips from Malaysia, the factories there have a large number of employees with covid-19 and the country has a lockdown. Due to the lack of chips, the company had to extend the plant-wide holiday for a week, when production is stopped. “Production will be fully resumed this Sunday at ten o’clock in the evening at night. So the 34th working week, everything will start. This is mainly to get things in order and find out how people returned to work and who will not come,” said Povšík.

Last year, the company produced about 210,000 fewer cars than planned due to the lockdown, according to Povšík. “So far this year we have about 60,000 minus cars – mainly due to a lack of chips. But we will certainly not achieve such a high outage as last year. If we had chips, we would smoothly break all records in the history of Škoda Auto,” said Povšík.

Last year, Škoda Auto delivered over one million cars worldwide. It operates three production plants in the Czech Republic, produces in China, Russia, Slovakia, and India, mostly through group partnerships, as well as in Ukraine and Kazakhstan in cooperation with local partners. It is active in more than 100 markets.