European Carmakers Facing Inventory Crisis, EU Considering Temporary Exemption for Sanctioned Chinese Chip Suppliers

According to Bloomberg citing informed sources, the European Union is preparing to introduce a temporary exemption that would allow Nexperia, a Chinese company included in the sanctions list, to continue supplying to the European automotive industry. The European Commission may propose this plan as early as this week, but it still needs unanimous approval from the 27 member states.

The informed sources revealed that European car manufacturers have been actively lobbying the EU to suspend the ban, as they have not yet completed the replacement of their supply chain. Once the existing inventory is depleted, the relevant chips could run out within weeks. Nexperia was previously included in the 20th round of EU sanctions because of allegations that it supplied dual-use products and components related to weapons systems to Russia.

At the end of last year, internal conflicts at Nexperia spilled over to the government level, with the Dutch government taking over its Dutch operations. In response, China subsequently restricted exports from its Chinese subsidiary, leading directly to a chip supply shortage that has impacted the production of several European car manufacturers. Although these chips are traditional power control chips with relatively low technological content, for car manufacturers, the discontinuation of a single, low-value component can also slow down the overall vehicle production rhythm.

Currently, European car manufacturers are also facing additional pressures brought about by cyclical changes in the semiconductor industry. Strong demand for AI applications has led to a tightening of overall supply and rising prices for memory chips. Against this backdrop, the tolerance of European car manufacturers for additional supply restrictions has significantly diminished.