Global Chip Shortage Reduces Subaru’s Profits By Almost Half

The global chip shortage has been a constant pain point for the entire automotive industry for the better part of a year. The shortage of semiconductor chips has interrupted supply chains which have caused several automakers to pause production on vehicles or temporarily shut down assembly plants. It appears that for Subaru, the semiconductor shortage significantly affected profits.

Subaru lowers profit expectations by 40% due to global chip shortage

Blue Subaru BRZ coming off a factory assembly line. Subaru recently announced that it expects profits to drop by nearly half due to the global chip shortage
Subaru BRZ at assembly plant | Subaru

Automotive News reports that Subaru’s profits have dropped by almost half in the latest quarter due to reduced production and sales due to the global chip shortage. Subaru’s profit fell 46% to $223 million in the quarter that ended on September 30th. The reduced profits forced the automaker to lower its year-end projections.

In a meeting earlier today (November 5th, 2021), Subaru CEO Tomomi Nakamura said the automaker was hit by increasing raw material costs and reduced production volume from supply chain disruptions.

Subaru’s production output fell by 40% to just 158,000 vehicles in the period between July and September. In the same period last year, Subaru produced 262,000 cars in the midst of the coronavirus (COVID-19) pandemic.

Subaru’s global sales fell by 13% during the same period. The Japanese automaker is now expecting to sell 830,000 vehicles by the end of its fiscal year, which ends March 31st, 2022. That is down by 3.4% over the previous year. The lower production is likely due to Subaru having to shut down plants as a result of supply chain shortages.

Significant changes in the supply chain will need to happen if Subaru is to regain its lost profits and lost production.

Honda also experienced reduced profits

An orange Honda Civic Si shot on a back road from the 3/4 angle
Honda’s newest Si stays under $30,000 | Honda

Subaru is not the only Japanese automaker to see lower profits due to the global chip shortage. Automotive News also reported that Honda saw a 30% dip in its operating earnings during the same fiscal quarter as Subaru.

When it announced its financial results, it reduced its sales and profit expectations for the current fiscal year, which ends at the same time as Subaru’s. Honda specifically cited the chip shortage as the main culprit for its reduced outlook on profits.

During the July-September fiscal quarter, Honda’s profits dropped to $1.78 billion from $2.53 billion in the previous year. Like Subaru, Honda faced factory shutdowns because of supply chain interruptions.

However, unlike Subaru, Honda’s Executive Vice President Seiji Kuraishi expressed optimism for the future. Kuraishi-san stated that he expects the global semiconductor shortage to start “easing” in early 2022. However, he also noted that the chip shortage would not happen fast enough for the automaker to recover its profits by the end of its fiscal year.

Stellantis European brands are suffering from the chip shortage as well

The Stellantis Palazzina Mirafiori plant. Analysts believe that the global chip shortage has been worse for Stellantis than the COVID-19 pandemic when it comes to vehicle production
Stellantis Palazzina Mirafiori plant | Stellantis

Stellantis is one of the largest automakers in the world, but it is not any less immune from the global chip shortage than Honda or Subaru is. Stellantis’ European brands have been hit especially hard by supply chain interruptions, resulting in some vehicles being delayed.

Experts have speculated that the chip shortage will have had a greater impact on Stellantis than the coronavirus pandemic. Though, it should be noted that the pandemic and the chip shortage are connected.

It remains to be seen if Subaru, Honda, Stellantis, or other automakers can eventually recover from the damage done by the semiconductor shortage.

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