EU carmakers ‘days away’ from shutdown as China chip ban bites

A new global chip crisis is brewing – and the UK car industry could soon find itself back in the firing line. That’s because China has banned exports of semiconductors made by Nexperia, a Dutch chipmaker that plays an important role in vehicle electronics.

Because of this, European carmakers including BMW, Mercedes, and Volkswagen have warned that they are just days away from halting production as supplies run out.

The European Automobile Manufacturers’ Association (ACEA), whose members include Fiat and Peugeot, said factories were running out of reserve stocks of chips, and those supplies are “dwindling.”

“Assembly line stoppages might only be days away,” said ACEA’s director general Sigrid de Vries. She urges governments to find a diplomatic solution before production grinds to a halt.

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What’s going on?

The Chinese government imposed the Nexperia export ban at the start of October after the Dutch government took control of the Netherlands-based firm and suspended its Chinese chief executive. It cited national security concerns that were flagged by the US.

This move has escalated a growing trade dispute between China, Europe, and the US, which was already ignited by new restrictions on rare earth exports set out by China’s president Xi Jinping.

Xi and US President Donald Trump are expected to sign off on a trade agreement on rare earth exports today (30 October). The proposed deal would pause the export ban on crucial minerals for a year. Though it’s unclear whether this will also cover deliveries to the EU.

Rare earths are important for the car industry as they are used in their windows, door and boot openings. Meanwhile, semiconductors are key for all electronics found in cars, ranging from dashboard functions to ignition and transmission systems.

The ripple effects of these supply issues are being felt worldwide. Mercedes boss Ola Källenius said the company is “searching globally” for new semiconductor suppliers, while Nissan’s chief performance officer, Guillaume Cartier, admitted that production in Japan is only secure “to the first week of November.”

But why are semiconductor chips so important?

Microchips, or semiconductors, are the brains behind everything electronic in a modern car: from infotainment systems to safety sensors and electric drivetrains. They’re also used in many safety features such as anti-lock braking systems and in airbags. The average petrol car uses around 1,000 chips; for electric cars, it can be double that.

With the UK car industry focusing on electrification, the stakes are higher than ever. “A single missing chip can stop an entire production line,” says Professor David Bailey, automotive expert at the University of Birmingham. “You can’t just swap suppliers – every component has to be rigorously tested for safety and compatibility.”

“Any disruption to chip supply now affects the very core of the UK’s green transition,” Mike Hawes, chief executive at Society of Motor Manufacturers and Traders (SMMT), added. “Without a resilient semiconductor strategy, we risk slowing down EV adoption and investment.”

Can UK carmakers weather the storm of a chip shortage?

For the UK car industry, the warnings are a worrying déjà vu. Manufacturers are still recovering from the 2021 chip shortage, which, amplified by the Covid pandemic’s impact on global supply chains, brought assembly lines to a halt and left buyers waiting months for new cars.

A spokesperson at SMMT told Carwow: “Another semiconductor chip shortage is the last thing the global automotive industry needs. While the sector has made efforts to diversify its supply chains, if not resolved quickly this issue has the potential to severely disrupt vehicle production and market supply.

“SMMT is actively monitoring the situation and is in contact with members and government to understand the scale of any impact and measures that might be taken to mitigate it.”

Now, experts say British manufacturers need to move quickly – strengthening supply chains, improving forecasting, and investing in homegrown semiconductor capacity – to avoid history repeating itself.

Now, experts say British manufacturers need to move quickly – strengthening supply chains, improving forecasting, and investing in homegrown semiconductor capacity – to avoid history repeating itself.

What can British car manufacturers do?

While much of the semiconductor supply chain sits beyond the UK’s borders, carmakers here aren’t powerless. Here are several ways British brands can protect themselves, and their customers, from the next chip crunch:

1. Build stronger relationships with suppliers

Manufacturers can no longer afford to rely solely on “just-in-time” logistics, where parts arrive exactly when needed. By forging closer ties with chipmakers and maintaining modest reserves of critical components, UK brands can give themselves a small but crucial buffer.

2. Invest in smarter forecasting

Advances in data analytics can help predict demand spikes before they happen. “By using AI and real-time monitoring, car companies can spot supply risks early, and act before they cause production delays,” says Bailey.

3. Diversify sources

Relying on just one or two suppliers has proven risky. For example, smaller companies dependent on Jaguar Land Rover were severely affected when one of its third-party providers suffered a major cyber attack – a disruption unrelated to the chip shortage but shows just how fragile supply chains can be. To reduce vulnerability, UK manufacturers can work with multiple chip producers, including emerging European and Japanese suppliers, to spread the risk

4. Push for local production

The government’s £1bn semiconductor strategy is a start, but some experts say the UK needs to go further. Incentives for domestic chip assembly and testing plants could make supply chains more resilient, especially for electric car components.

5. Keep customers informed

Transparency goes a long way. Clear communication about delivery timelines, component shortages, and alternative models can help maintain customer trust, even during disruptions.

What it means for drivers

If the Nexperia crisis deepens, buyers could see longer wait times for new models, particularly for electric cars which are most reliant on advanced chips.

There’s also the risk that another global shortage will leave UK manufacturers scrambling for supply. Companies such as Nissan in Sunderland and Stellantis in Ellesmere Port could face production delays, while suppliers – already operating on tight budgets – might need costly fixes or even temporary shutdowns. As a result, customers may experience longer waiting times for new cars.

In the longer term, the looming crisis could highlight areas where the UK car industry needs to become more resilient. Closer partnerships between manufacturers, suppliers, and government may help reduce the impact of future supply disruptions.

For UK drivers, this could mean shorter waiting times for new cars and a more dependable supply of vehicles in the years ahead.

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