Without Simple Chips, Car Production in Europe Comes to a Halt

The European Automobile Manufacturers Association (ACEA) has warned that production in European factories is ‘days’ away from stopping due to a blockade of supplies of basic chips that are integrated into the auxiliary and safety systems of vehicles.

– Parts are already starting to stop arriving, and a halt in production could be just a few days away – said ACEA’s Director General Sigrid de Vries, appealing for a swift diplomatic resolution to the dispute.

What Went Wrong

At the heart of the crisis is the dispute over Nexperia. After the Dutch government took control of Nexperia (a European manufacturer owned by Chinese Wingtech) in September, Beijing blocked export licenses for Nexperia’s plants in China. This has interrupted the flow of ‘basic’ auto chips to Europe and the U.S., as well as key discrete semiconductors and simple microcontrollers used in window lift modules, lighting, pumps, heaters, seats, or auxiliary control units; without them, a vehicle cannot leave the production line.

Over the weekend, China’s Ministry of Commerce signaled partial exemptions (case-by-case) for some of Nexperia’s products, but restrictions still apply and do not eliminate the short-term risk of halts.

Why the Simplest Chips Are the Most Critical

Automotive electronics contain thousands of inexpensive components, from transistors, diodes, MOSFETs, regulators to small microcontrollers, which are ordered in massive batches, strictly qualified by supplier and production line. Redirecting to another source realistically takes months. Therefore, even short interruptions in the supply of ‘basic’ chips can halt an entire vehicle, even though their unit value is in cents.

Demand Has Not Collapsed, but It Is Fragile

By September, the market for new cars in the EU had slightly grown by about +0.9 percent compared to last year, while the share of fully electric (BEV) vehicles was 16.1 percent. September itself was strong, with Europe growing by about +10.7 percent. Despite this, manufacturers are pressured by higher costs, U.S. tariffs, slower customer transitions to electric vehicles, and stronger competition from China. If these basic chips also ‘get stuck’ now, we could easily see delivery delays by the end of 2025 or early 2026.

Moreover, the auto sector in the EU directly and indirectly employs 13.6 million people and generates more than 8 percent of the EU’s GDP, bringing in €414.7 billion in tax revenues, €93.9 billion in trade surplus, and invests €84.6 billion annually in research and development. Each week of delay multiplies through OEMs and tens of thousands of suppliers, ACEA notes.

In 2023, the EU adopted the European Chips Act to strengthen resilience and double its share of global chip production by 2030. However, every new crisis reminds us that the EU still depends on Asian hubs for packaging and testing, as well as visibility of stocks in deeper layers of the supply chain. The European Court of Auditors in a new report highlights that strategic autonomy is ‘in progress’, with risks in the implementation and coordination of investments.