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Carmakers are struggling with a worldwide chip shortage

Vehicles remain unfinished due to lack of electronic components

A global microchip shortage is seriously affecting output at car factories. IMAGE FROM PIXABAY

A global shortage of crucial electronic components is currently causing headaches for many businesses that depend on them, with carmakers one of the hardest hit. Waiting times for orders of certain computer chips have increased to an average of four months, which is exceptionally long and is a sign that the supply bottlenecks in the industry are increasing. As a result, a number of vehicle manufacturers are planning to (or have already had to) temporarily reduce or stop production. The reasons for this shortage are numerous and unlikely to be resolved quickly.

General Motors had to close one of its factories in Kansas City in February due to a semiconductor shortage, with staff still twiddling their thumbs until now. Mercedes-Benz is trying to hoard the precious components, but was still forced to halt production of entry-level C-Class variants. French automaker Peugeot has resorted to fitting older analog gauges instead of the new digital instrument clusters in some of its models due to the parts for the high-tech version simply not being available. Even Porsche has warned its dealerships that delays of up to 12 weeks for new vehicles are a possibility due to a shortage of certain semiconductor chips. The scarcity couldn’t have come at a worse time for a car industry that is currently trying to recover from the coronavirus-induced recession of recent months.

Production lines are littered with unfinished vehicles sitting idle due to missing components. PHOTO FROM VOLKSWAGEN

Consumers are starting to try and spend the money they saved last year, with many buyers now looking to use cars instead of public transport. The lack of parts and the delays resulting from it are affecting the industry’s chances of making up for lost income, and will likely affect balance sheets negatively in very significant ways. Some manufacturers such as Renault are trying to prioritize semiconductor stock, and are using them in higher-priced, more profitable vehicles first. Others like Porsche are trying to push buyers toward models and options that can be built without delay. The Germans have apparently advised their US dealers that anyone wanting their new Macan delivered with the ultra-comfortable seat option that can be adjusted in 18 different ways will have to wait a few more months. The chips used in those seats are simply not available right now.

While modern cars can easily have 2,000 or more chips installed within them, the car industry actually isn’t the biggest user of those components. That honor goes to the manufacturers of consumer electronics, such as smartphones and game consoles. Because chipmakers earn more from those firms, they are prioritized over auto companies when it comes to who gets what and when. As if playing second fiddle to semiconductor manufacturers wasn’t bad enough already, global supplies were further affected by a number of recent incidents. One of them was a fire in a Renesas Electronics factory in Tokyo, Japan, while bad weather in the US and a drought in Taiwan are also affecting production numbers of the tiny parts. The factories that make these parts require a lot of water, and if there’s not enough to go around, then there won’t be any production.

If you want a Porsche Macan right now, get one without the ultra-fancy power seats. PHOTO FROM PORSCHE

Finally, the incident where the container ship Ever Given blocked the Suez Canal for days, has also had a serious effect on tightly organized supply chains, with everyone now frantically trying to catch up. The list of car firms affected by this avalanche of problems seems to be growing by the day. At the time of this writing, Jaguar-Land Rover has temporarily halted production at two factories. Daimler is looking at further measures such as reducing working hours for staff while the shortage persists. Ford is cutting down output at a number of facilities. And even mighty Volkswagen is looking to slash its wage bill while workers have no chips to fit to cars waiting on the production line.

While chipmakers are now trying to increase output, the issues we are seeing right now will likely last throughout the year and will not be fully resolved before 2022. Once again, this shows how dependent we have become on electronics in everyday life. And if you’re in the market for a new car, then either prepare to wait or accept whatever is available in the showroom right now.

Frank Schuengel

Frank is a German e-commerce executive who loves his wife, a Filipina, so much he decided to base himself in Manila. He has interesting thoughts on Philippine motoring. He writes the aptly named ‘Frankly’ column.