What chip crisis? European car sales projected to grow 7.9% in 2022

Despite the chip crisis devastating the global auto industry, Europe is likely to register a 7.9 per cent growth in passenger car sales to 10.5 million units in 2022. European Automobile Manufacturers' Association (ACEA) on Tuesday has projected that passenger car sales in the continent will rise again in 2022 as the prolonged microchip crisis that has put the brakes on the industry will ease.

However, despite the growth forecast, the projected sales number remains almost 20 per cent down the 2019 pre-pandemic level, as car sales collapsed last year owing to the severe shortage of semiconductors. New passenger car registrations slumped by 2.4 per cent to 9.7 million units in 2021. ACEA says the chip shortage is expected to gradually stabilise this year.

Microchips are considered the most important element for modern cars as they power everything from anti-lock braking systems to airbags to parking assistance technology to infotainment systems. Modern cars rely heavily on chips. A majority of automotive chips are currently imported from Asia.

During the first wave of pandemic, when the majority of the world entered into the lockdown phase, demands for microchips from consumer tech product manufacturers increased drastically. This propelled the chipmakers to channelise their resources to make microchips for consumer tech companies. Later when the auto industry restarted its operation, the chipmakers failed to cope with rising demand, resulting in a severe shortage of automotive chips.

Throughout 2021 and in 2022 as well, several automakers have been forced to halt or realign their car production due to the semiconductor shortage. However, as Europe is trying to cut their dependence on Asia for chips and trying to become self-reliant, ACEA believes the situation will improve later this year. European Union has already launched a plan to raise tens of billions of euros to boost semiconductor production in the continent.