Never Had Supply Chain Shortages Like Today, Says Volkswagen

"We never used to talk to mining operators - now we know their business model," Volkswagen’s purchasing chief Murat Aksel said in Berlin

Volkswagen was also building a database to help predict geopolitical, natural and supply chain risks ahead of time, as it did for financial risks after the 2008 financial crisis.

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Volkswagen has been entering in direct purchase agreements in unprecedented areas to tackle the worst supply chain shortages the company has seen, Murat Aksel, companies purchasing chief, said on Tuesday, according to Reuters. "We never used to talk to mining operators - now we know their business model," Aksel told a conference in Berlin. "It is no longer enough to rely on Tier-1 suppliers - we need to look behind the curtains ourselves," said Aksel.

The German carmaker was also building a database to help predict geopolitical, natural and supply chain risks ahead of time, as it did for financial risks after the 2008 financial crisis, Aksel said.

Speaking at the Automobilwoche Kongress Aksel said, Volkswagen is experiencing a shift in power from a buyer's market to one where the carmaker was increasingly a smaller and less powerful customer for suppliers in newly important areas, such as softwares, reported Reuters. 

Before other companies would order a million chips a week or day, now the carmaker was looking for a million a year, he added, dampening its negotiation power. "For the software providers, we're the small player, not the big one," Aksel said. 

About his view on the chip supply situation at present, Aksel said he expected some easing next year but that the company was still unable to keep up with demand, with some brands sold out for 2023.

According to JP Morgan, the current chip shortage is due to strong demand and no supply. This goes back to Covid lockdowns in the second quarter of 2020, when demand for work-from-home technology increased exponentially and automakers found themselves competing for the semiconductor capacity located in Asian factories.

“We’re going to get a lot more semiconductor capacity in the second half of 2022 – we’re nearing the end of the supply crunch,” JP Morgan's Head of European Technology Research Sandeep Deshpande said back in August. "However, capacity still needs to be qualified for use in the automotive industry. Can the right matching occur between available supply and correct qualification? This is the difficulty that remains,” Deshpande added.