Mexican Plants Could Halt Production Amid Chip Shortages

International conflicts are forcing automakers to close plants and halt their production. In Mexico, plants are expected to pause their production due to chip shortage. The low vehicle production in Mexico, the volatility in vehicle prices, the changing fluctuation and the chocolate cars regulation are impeding the recovery of the country’s automotive industry, reports Deloitte.

Volkswagen and Mazda have already paused their production in some manufacturing plants located in Mexico. “The component shortage will continue to be a complex problem; supply chains are not resilient yet. There is still a high dependency on suppliers,” said Francisco Bautista, Leader, Advanced Manufacture and Mobility, EY.

“It is very likely that new halts will occur, depending on the availability of semiconductors or chips,” said Fausto Cuevas, Director, AMIA.

The global semiconductor shortage is caused by a combination of the effects of the global COVID-19 pandemic, trade conflicts between China and the US, inclement weather in some regions of the world, fires at semiconductor facilities and general increases in prices of raw materials, said Alberto Robles, Supply Chain Manager, General Electric, to MBN.

Now, the Ukraine war has been added to the list of chip shortage causes. Neon is used in the production of semiconductors and Ukraine supplies 50 percent of the world’s neon. Ingas and Cryoin, which provide half of the world’s semiconductor-grade neon, haltered their production following the Russian invasion. In face of this scenario OEMs, such as Volkswagen, have tried to buy semiconductors directly from the manufacturers, said Bautista.

All automakers are suffering the consequences of the current international crises. Toyota has been forced to suspend its production in one line of a factory and will lower its production for three months. The new COVID-19 outbreak in China is also affecting OEMs. Toyota, for example, will halt production in its Changchun plant while Tesla is halting production at its Shanghai plant.

Despite the effects of the crisis, some automakers believe their strategies will facilitate their recovery. “We do not source our components only from Ukraine; this has allowed us to relocate [the sourcing of] some components. We will be able to ramp up the two plants which have been on standby. Our US and Chinese operations have not been affected so far and I think that we will be able to cope with the current situation,” said Oliver Zipse, CEO, BMW.