The Great Chip Shortage - Long-Term Consequences

The Great Chip Shortage - Long-Term Consequences

Automotive Weekly

The Great Chip Shortage - Long-Term Consequences


More Production Reductions

The once-obscure world of automotive microchips will never be the same again. It has been a difficult month for the car industry. Manufacturers such as Toyota and General Motors have announced sweeping reductions to their fall production schedules for want of parts, particularly semiconductors. Consulting firm AlixPartners said Thursday that the chip shortage would likely cost the industry $210 billion in lost revenues this year, which was almost double its May estimate. Source: The Wall Street Journal

Car Companies Buckle Up for Extended Chip Shortage

The global chip shortage has slammed the auto sector this year, cutting factory output by several million vehicles and erasing billions in revenue for car companies. Next year is expected to be nearly as challenging, industry analysts say. Auto executives for months have expressed optimism that the problem would begin to ease by year’s end. Now, there is an emerging view that the chip shortage has morphed from a short-term crisis into a structural upheaval for the automotive supply chain that could take years to fully overcome. Source: The Wall Street Journal

Automakers' problems are much worse than we thought

For a year and a half, a lack of computer chips has been plaguing the auto industry, forcing plants to shut down, delaying auto shipments and sending car prices through the roof. But that's not the only problem automakers face. Industry experts say automakers are having trouble getting all manner of parts and raw materials for a variety of reasons, including Covid-related plant shutdowns by suppliers, logistical problems involving shortages of ships, shipping containers and truck drivers, and difficulty that some suppliers are having filling jobs. That's making the cost of the current supply chain crisis much larger than earlier estimates, leading to much higher costs for automakers and car buyers as well. Chips "are just one of a multitude of extraordinary disruptions the industry is facing — including everything from resin and steel shortages to labor shortages," said Mark Wakefield, global co-leader of the automotive and industrial practice at industry consultant AlixPartners. "There's no room for error for automakers and suppliers right now."

Temporary shutdowns and slowed production rates are hitting auto plants around the globe, cutting into the supply of available cars. AlixPartners now forecasts that supply chain problems will cause automakers to build 7.7 million fewer vehicles globally than they would have if they could get all the parts and raw materials they need. That's up from the 3.9 million vehicle shortfall that had been forecast in May.

That tight supply of vehicles, coupled with strong consumer demand, is a major factor driving both new and used car prices to record highs.

Plus, the lost sales from not building those vehicles will cost the automakers about $210 billion this year, according to AlixPartner's latest estimates. That's nearly twice the firm's $110 billion estimate from May. Those lost sales will be only partly offset by higher prices, which will bring in an additional $90 billion in revenue on the vehicles that are sold. But the automakers will also have to pay $150 billion in increased parts and raw material costs, or roughly $2,000 per vehicle. All told the industry will take a net $270 billion hit from the various shortages, according to AlixPartners' estimates, while car buyers will pay $90 billion in higher prices.

Supply chain reaction - The computer chip shortage first hit the auto industry last year. As the pandemic spread and car sales fell suddenly, most automakers cut back on future chip orders, anticipating that demand for new cars would remain depressed for an extended period. But when car sales bounced back much faster than expected, the automakers found they couldn't restore their chip orders because the tech industry had snatched up the supply to use in everything from laptops and tablets to phones and 5G networks.

Microchip supply had been widely expected to bottom out in the second quarter of this year, and then start to improve. But a surge in Covid-19 cases caused a new round of shortages, as chip plants were forced to temporarily shut down in some hard-hit countries, such as Malaysia. In the meantime supplies of other key materials have also dried up. "It's not just the chip shortage. Just about every industry ... is dealing with some kind of supply chain issue," said Cindy Jaudon, regional president for the Americas at IFS, a global enterprise software company. "Our ports are extremely full. Paint manufacturers are struggling with titanium dioxide. They layer on top of each other."

And there is little relief in sight. "There really are no shock absorbers left in the industry right now when it comes to production or obtaining material," said Dan Hearsch, a managing director at AlixPartners. "Virtually any shortage or production interruption in any part of the world affects companies around the globe, and the impacts are now amplified due to all the other shortages. "

Source: CNN


Cadillac has lost around one-fifth of its dealers after it announced that it is going all-electric, but now it is actually gaining new dealers interested in the transition. Previous studies have found that electric car adoption has been slowed down by car dealers who are “dismissive and deceptive” when it comes to electric vehicles. They are the ones actually selling vehicles for automakers in the US – so if they are not on board with electrification, it seriously impedes adoption.

When Cadillac announced its move to all-electric vehicles, it told dealerships they needed to invest about $200,000 on the EV chargers, tooling, and training. Last year, GM gave an ultimatum to Cadillac dealers who don’t want to make that investment, that they could do it or accept a settlement to exit the brand. About one-fifth of the 880 Cadillac dealers in the US reportedly took the deal.

But now, a year later, Cadillac is actually adding new dealers in critical markets with a focus on electric vehicles.

Auto News reports:

“Cadillac is entering new luxury markets and reestablishing itself in crucial areas it had ceded to rivals — including Beverly Hills, Calif., where it hadn’t been since the 1980s, and its former home base of Manhattan, N.Y., where its only store closed last year. Some established Cadillac dealers are scooping up additional stores, while a few dealers are getting involved with the brand for the first time.”

Since the purge of EV-unfriendly dealers, Cadillac has now added eight new dealerships that hope to bank on the upcoming new electric vehicles from the brand. The Cadillac Lyric is the first new EV coming from the brand. As we reported earlier this week, the first edition reportedly sold out in 19 minutes, however, the company didn’t confirm how many reservations were made available.

The first Lyriq deliveries are expected to begin in Q2 of 2022. The Lyriq is going to be offered with a 100 kWh battery pack enabling over 300 miles of range on the first version available, which is going to be rear-wheel-drive. Future versions of the vehicle should come with an all-wheel-drive powertrain. The charging capacity is also very good with a 19.2 kW onboard charger, which is going to give the Lyriq access to best-in-class level 2 charging. It is also able to charge at up to 190 kW with level 3 DC fast-charging. The starting MSRP of the Cadillac Lyriq is going to be $59,990 before taxes or incentives.

Source: Electrek


Hybrid and plug-in hybrid models will still be available

Marketed since 2016, the fourth-gen Toyota Prius has not aged a bit and its design is still very distinctive. But faced with the SUV wave, the car is undoubtedly losing ground, especially in the United States. As a result, it will be handed over to a brand new generation next year.

According to the Japanese website BestCarWeb, the all-new Prius will arrive in December 2022 and will remain a hybrid. Hybrid and plug-in hybrid versions will therefore be renewed. However, the magazine announces a major novelty: the Prius 5 will also have a new hydrogen powertrain.

However, we will have to be very patient as this version will arrive three years after the hybrid models. The technology is still new and complex and will require a considerable amount of development time before it can be put into production. The Japanese brand is already undertaking tests on a Corolla Sport equipped with the 1.6-litre engine common to the demonic GR Yaris.

The Prius is still not going to be fully electrified and this reinforces Toyota's desire to invest massively in hydrogen. The brand's CEO, Akio Toyoda, has repeatedly told the international press that all-electric is not a viable solution in the long term.

Source: Drivetribe


Daimler's Mercedes-Benz said on Friday it will take a 33% stake in battery cell manufacturer Automotive Cells Company (ACC), expanding its European sourcing of battery cells key to its EV ambitions and currently produced primarily in Asia. ACC, founded in 2020 by France's Stellantis and TotalEnergies, will begin supplying Mercedes-Benz with batteries from its production locations in France and Germany from the middle of the decade.

Source: Reuters


According to J.D. Power’s recent U.S. automotive brand loyalty study, customer experience is an important retention factor, with brands that get it right commanding a 60%+ repurchase rate. But creating frequent and impactful touchpoints can be a challenge, particularly with dealer service volume for older cars in steep decline. Understanding the vehicle ownership experience outside the dealership is key to bringing owners back into the showroom.

Source: WardsAuto


Ford is close to choosing one of its two transmission plants in Europe to produce electric drivetrains, sources close to the automaker say. The two plants in contention are Ford's two former joint venture facilities with Getrag, now fully Ford owned. One is in Halewood, England, and the other is in Cologne, Germany. Ford will announce its decision "within weeks," according to UK broadcaster Sky News, which first reported the story. The winning plant would build "e-drive" units that include an electric motor, a transmission and inverter for electric vehicles, a source said.

Source: Automotive News


The 2021 Ford Mustang Mach-E has won over many with its impressive performance thus far, including law enforcement after the crossover recently became the very first EV to pass Michigan State Police testing. The Ford Mustang Mach-E powertrain was also just named a 2021 Ward’s 10 Best Engines winner, another big feather in its proverbial cap. However, the Mach-E apparently isn’t quite as adept at a maneuver referred to as the “Moose Test.” The Moose Test is designed to evaluate a vehicle’s electronic stability control system in real life. At speed, the driver of the vehicle conducts an evasive maneuver around an obstacle, while remaining within certain limits or lanes. The same test is then conducted over and over again at increasingly high speeds until the vehicle fails to stay within the designated limits or when it hits the obstacle.

The automotive journalists at Teknikens Värld recently subjected a Mach-E Long Range all-wheel drive model to the Moose Test, along with a variety of other electric vehicles including the Hyundai IONIQ 5, Tesla Model Y, and Skoda Enyaq iV. The Mach-E fared the worst of that bunch, as it proved to be quite difficult to maneuver at speeds of 40.5, 42.3, and 43.5 miles per hour before ultimately failing the test at 44.7 miles per hour

The testers noted that the rear end of the Mach-E is very unstable at speed, and the vehicle exhibits slow steering and a soft chassis, as well as a slow-to-respond electronic stability control system. At speeds below 44.7 miles per hour, the Mach-E hits the cones that represent the edge of the road and proceeds to go off the “road” completely at 44.7 miles per hour. Meanwhile, all three of the Mach-E’s competitors manage to pass the test at higher speeds and do so without hitting any of the cones.

Source: Ford Authority


In the race to build a cheaper and longer-range electric car, auto companies are pouring more money into a technology long considered a moonshot: solid-state batteries. Today, most electric vehicles use lithium-ion batteries, which have become more powerful and affordable over the years but have limitations, including the risks of catching fire. The configuration has the potential to deliver faster charging times and make the packs safer by eliminating the flammable electrolyte solution used in lithium-ion batteries, auto executives and analysts say.

Source: The Wall Street Journal 

Subscribe to our Automotive Weekly newsletter

Get the latest report on trends, market conditions, and the most current information in the industry.