Volkswagen is preparing its factory workers for potential production stoppages and shortened working hours at plants across Germany, citing a sudden shortage of semiconductor chips.

The warning, issued to employees in a letter on Wednesday, signals that the automotive industry’s supply chain vulnerabilities, exposed during the Covid pandemic, aren't fully resolved.

Production is currently unaffected, said Volkswagen, but it acknowledged that “against the backdrop of the dynamic situation, effects on production cannot be ruled out at short notice".

The warning to employees stems from a supply freeze of chips from Nexperia, a semiconductor manufacturer at the centre of a dispute between the US and China.

After the Dutch government took control of Netherlands-based Nexperia last month, under pressure from the Donald Trump administration, Beijing retaliated by banning the export of the company's Chinese-made chips.

The Dutch government takeover was enacted on 30 September, with officials citing intellectual property concerns due to its Chinese ownership.

The move has created immediate ripple effects, with Volkswagen confirming it has been formally notified by Nexperia that it can no longer guarantee the delivery of semiconductors.

Nexperia chips are used in unspecified electronic systems in Volkswagen models. A prolonged shortage would therefore force the German car maker to significantly scale back production, both at home and across its global production network, Autocar has been told.

In preparation of potential production stoppages at plants in Germany, Volkswagen has initiated discussions with government-run employment agencies regarding the implementation of 'kurzarbeit', a state-subsidised scheme to avoid mass layoffs during industrial downturns.