VW to halt Mexico output due to chip shortage

Volkswagen of America has informed its U.S. dealers that the global chip shortage “and other supply chain related issues” will force extended production hiatuses at its massive plant in Puebla, Mexico, along with an earlier hiatus announced for its assembly plant in Chattanooga, Automotive News has learned.

In letters to dealers this week, VW told dealers “Despite monumental efforts to avoid additional shut downs, Volkswagen will have to temporarily suspend production at our Puebla assembly plant for just over three weeks in June and early July, impacting the production of Jetta, Tiguan and Taos.”

VW is launching its compact Taos crossover next month and the Tiguan is receiving a refresh for the 2022 model year, with new vehicles expected to arrive in the fall. The Tiguan is VW’s top-selling vehicle in the U.S.

In the dealer letter, shared with Automotive News, the brand said it would “continue our planned market introduction of the Taos in early June with well over 8,000 Taos expected to deliver to dealers in June alone. However, due to this lost production, it will take additional time to build Taos inventory up to our target levels, and delay our efforts to balance the FWD and AWD availability.”

In a statement the automaker said: "Volkswagen de México expects to make further adjustments to its production program, which will begin in June and at different times for its three production segments, the resuming of manufacturing activities will re-established gradually as soon as our suppliers guaranteed to us, we will do our best effort to recover production later in the year."

This month, VW of America product and strategy executive Hein Schafer said if the chip shortage hits the automaker hard in the second half of the year, it will likely prioritize production of the Taos over the larger, more expensive freshened Tiguan to ensure the Taos' launch is uninterrupted. 

Earlier in the week, VW told dealers that its plant in Chattanooga, would lose two weeks of production the weeks of June 7th and 14th because of the microchip shortage. Chattanooga builds the Atlas and Atlas Cross Sport crossovers, as well as the Passat sedan.

VW has under 40 days supply of inventory on hand at its dealerships. The brand reports its U.S. sales quarterly, and won’t report its second-quarter sales until July.