Chip shortage affects car production

Chip shortage affects car production

Just when the industry was beginning to recover from COVID-19 lockdowns, a new supply chain disruption is on the horizon; a global shortage of semiconductor chips.

Car manufacturers could to lose as much as $61 billion in revenue, Bloomberg reports. Companies like Ford, Audi, Volkswagen, Toyota, Nissan and Fiat Chrysler already had to halt production or even close factories for the time being. It is expected that more companies will be impacted by the lack of computer chips, because they are vital to a multitude of applications such as assistance systems.

What happened?

The main reason for the shortage? The JIT/LEAN (just-in-time) production principles in the industry, appears to be -at least part of- the problem. By the time auto parts suppliers realized they were running short on the dozens of microprocessors needed for each car, chipmakers were overloaded with requests for semiconductors for the cellphones, game consoles and computers that housebound shoppers were buying with great numbers, in the COVID-reality.

The chipmakers insist the car industry’s obsession with low inventories is to blame. Auto and parts producers counter that semiconductor manufacturers have favored consumer-electronics companies because those gadgets provide the bulk of their profits—an allegation chipmakers deny. Regardless of who’s at fault, few expect the bottleneck to clear before the summer, and some say it will last into the fall.

What to do?

We expect that the number of cars available to the market will remain low in the next few months, until the chip shortage is resolved. In combination with the fact that production was still recovering from the first lockdowns, this could result in a real market squeeze.

It feels counter intuitive, but despite the severe economic impact of the COVID-lockdowns measures; now seems to be the time to invest in stock. And not make the same mistake as the manufactures did by keeping their (production) inventory low. Without available cars for sale, the economic bounce back from the COVID-lockdowns will be even tougher for many car retailers.

All things considered, it made us decide at Network4Cars to continue to invest in our stock positions, with a variety of brands and models. Essential because we need and want to be ready to service our clients when markets return to the (new) normal.

Feel free to browse through our available cars on our website. Make sure to check our weekly offers or subscribe to the newsletter if you don’t receive these offers yet.

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