- Microchips are an integral part of modern automotive electronics and have been in short supply since late last year.
- The situation is due to the automakers who reduced their orders when the pandemic occurred.
- The shortage could result in an overall loss of production of 5.2 million vehicles this year.
The automotive industry has been hit hard by a shortage of computer chips, delaying production and going on for months.
Automakers and suppliers have outperformed expectations in the first half of this year, but warned that a shortage of semiconductors is putting pressure on production.
Microchips are an integral part of modern automotive electronics and have been in short supply since late last year.
The situation was due to automakers shrinking orders when the pandemic occurred, so chip makers shifted their output to consumer electronics.
As a result, as demand recovered, automakers were in a difficult situation, with production slowing or temporarily shutting down in many factories.
Automakers and analysts were initially convinced that the impact would be short-lived and limited, but now they believe it will last for the rest of the year and the impact will be more significant.
Jaguar Land Rover warns that chip shortages could cut production in the third quarter in half.
The Volkswagen Group said it is likely that the impact will be “more pronounced” in the third quarter as it has lowered its annual production forecast by about 450,000 units.
That’s 5% of last year’s production level, one-third of VW’s expected increase in production earlier this year.
“The risk of bottlenecks and disruptions in the supply of semiconductor components is increasing across the industry,” said a German automaker.
VW said one way to deal with the shortage is to favor luxury cars that bring more money.
Ford, a US automaker, said the strong demand for vehicles created by the shortage meant that it could not only reduce promotions, but also focus on the most profitable models.
Ford said average selling prices were up 14% from last year as second-quarter profits surprised analysts at $ 1.1 billion.
Nissan has been forced to postpone the launch of the new all-electric crossover, the Ariya, due to a shortage of chips that some media outlets call “Chiptastroff” or “Chipagon.”
But according to one analyst, the worst could already be behind the car maker.
“We have reached the peak of the crisis,” said Ferdinand Dudenheffer, head of the German Automotive Research Center.
“The situation will improve as new capacity becomes available, but the problem will not be resolved by the end of 2021 and may continue until 2023,” Dudenhoeffer told AFP.
He predicted that the shortage would result in an overall loss of production of 5.2 million cars this year.
Consumers may notice longer delays and higher prices because dealers process inventory and manufacturers offer less promotions.
Used car prices have also risen as unmet demand has shifted from the new car market.
Valeo, a car supplier that uses chips in driver assistance systems and automatic lighting systems, says it has so far escaped production outages.
However, the French company says it is buying all the supplies it can get and expects the shortage to continue until next year.
For years, automakers have been working to reduce their supply to improve their financial performance.
The crisis seems to be urging manufacturers to reassess this practice called “just-in-time.”
“Suppliers and OEMs are reassessing their supply chains and trying to better control their procurement from different channels, if possible, by diversifying,” said a European automotive supplier. The association’s Nils Paul said.
But as automakers overcome the chip shortage, another problem awaits, Dudenhoeffer warned.
Battery companies are likely to have a hard time catching up as automakers aim to increase production of electric vehicles quickly, and a shortage could occur from 2023, he said.
Automakers warn of lack of chips to brake recovery
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