Auto Parts Giant Continental Cuts Outlook As Supply Bottleneck Tightens

Major German auto parts manufacturer Continental revised down its outlook for 2021 as shortages in semiconductors and global supply chain disruptions weighed on the industry, the company said Friday.

"Negative effects from cost inflation for key inputs including electronics and electromechanical components", as well as raw materials, were becoming more significant, Continental said in a statement.

Short supplies of semiconductors and "uncertainties related to the supply chain" meant the global car market would stagnate relative to 2020, a year ravaged by the coronavirus pandemic.

The group's sales for the entire year were now expected to sit between 32.5 billion and 33.5 billion euros ($37.8 billion to $39 billion), having previously been estimated at between 33.5 billion and 34.5 billion euros.

Continental's operating margin (adjusted EBIT), a measure closely watched by investors, would now come in at between 5.2 and 5.6 percent, having been anticipated to land between 6.5 and 7 percent, the group said.

The group's sales for the entire year were now expected to sit between 32.5 billion and 33.5 billion euros ($37.8 billion to $39 billion)

The upheaval caused by the pandemic has given rise to global shortages in everything from timber to semiconductors and plastics, limiting production across the economy.

Germany's key automotive sector has been particularly hard hit by a lack of computer chips, a key component in conventional and electric vehicles, forcing several German carmakers to pause production.

European new car sales fell to their lowest level for a month of September since 1995, the European Automobile Manufacturers' Association said last week.

Continental's sales in the third quarter were down year-on-year by 8.5 percent to 8 billion euros as the supply crisis worsened, according to preliminary figures published alongside the outlook revision.

The group's automotive arm posted a loss, with an operating margin of -2.3 percent.  The full quarterly results will be published November 10.