Global chip dispute threatens auto production again!

The auto industry just can’t seem to get a break.

Just a few years out from COVID-era supply chain issues, a new computer chip shortage looms — and it’s threatening manufacturers on both sides of the Atlantic.

Germany’s auto industry lobbying group VDA warns that carmakers are days away from having to shut down production — with the crisis possibly spreading beyond Europe to the U.S. within weeks.

Automakers cannot simply switch suppliers overnight; qualifying new chips and redesigning vehicle modules take months.

Here’s the issue: A Dutch chip maker called Nexperia got bought out by a Chinese company called Wingtech. The Trump administration then warned the Dutch that the Chinese were planning to move technology and production out of the Netherlands to China, so the Dutch government seized control of the company in September. China retaliated by prohibiting exports of Nexperia components that are made in China.

Voila: a brand new chip shortage.

Going Dutch

Nexperia may not produce the most advanced semiconductors, but it’s an essential, high-volume provider of automotive chips that control electronic systems in modern vehicles. Without them, automakers cannot assemble cars efficiently.

On September 30, the Dutch government invoked emergency powers to take control of Nexperia, citing concerns about technology transfer to the company’s Chinese parent, Wingtech. This action followed months of U.S. pressure, including adding Wingtech to the U.S. Entity List (thus requiring a special license for an American company wanting to trade with it) and extending export control restrictions to subsidiaries owned at least 50% by China.

Dutch officials described the intervention as a defensive step to protect European technological assets and maintain supply-chain security. While day-to-day operations have been left to the Chinese owners, strategic decisions now fall under government oversight.

China calls

On October 4, China’s Ministry of Commerce issued export controls prohibiting Nexperia China and its subcontractors from exporting certain finished components and sub-assemblies. Automakers immediately expressed concern.

The European Automobile Manufacturers’ Association warned that production could be significantly disrupted. In the U.S., the Alliance for Automotive Innovation, representing nearly all major automakers including General Motors, Ford, Toyota, Volkswagen, and Hyundai, urged a quick resolution.

“If the shipment of automotive chips doesn’t resume — quickly — it’s going to disrupt auto production in the U.S. and many other countries and have a spillover effect in other industries,” said CEO John Bozzella.

Supply-chain sequel

Modern vehicles rely heavily on electronics. Even models without luxury infotainment systems use Nexperia chips for electronic control units, powertrain management, safety systems, and more.

The disruption illustrates the fragility of the global supply chain. Automakers cannot simply switch suppliers overnight; qualifying new chips and redesigning vehicle modules take months. Even a small interruption can cascade, causing production delays, increased costs, or halted assembly lines.

Volkswagen and BMW reported that European production has not yet been impacted but said they were actively evaluating supply risks. In the U.S., exposure grows daily as plants rely on components sourced through European operations or shared supplier networks. Japan and other countries are already preparing for the negative impact.

Chips are down

The disruption could lead to short-term production slowdowns, with car plants in Europe, Japan, Korea, and potentially the U.S. reducing shifts, delaying vehicle launches, or postponing deliveries.

The need to find alternative suppliers, expedite shipping, or re-engineer components will increase costs, potentially raising vehicle prices for consumers.

Automakers are also likely to accelerate supply-chain restructuring, diversifying suppliers, resourcing production domestically, or redesigning vehicles to rely less on single-source components. If chip availability remains constrained, vehicles may arrive with fewer options or higher prices, impacting both buyers and dealers. This will not help a hurting industry.

Slow learners?

The Nexperia dispute highlights a growing reality: Automakers are navigating a geopolitical minefield. Governments increasingly treat technology and component supply as strategic assets, and decisions made halfway across the world can ripple through production lines almost instantly. It seems like the last chip shortage didn’t teach too many lessons.

Automakers must now consider geopolitical risk in procurement decisions, diversify suppliers, and maintain contingency stock. For consumers, vehicle availability, pricing, and features can be affected by forces far beyond local dealerships. Just like the last chip shortage, dealers raised prices to offset lack of supply and high demand.

In a world where electronics are as essential to cars as engines, supply-chain resilience is no longer optional — it’s critical. The Nexperia dispute is a warning sign, and for the auto industry, the stakes could not be higher.