If you’re wondering why auto production isn’t getting back on track, you’re not alone. S&P Global Mobility recently lowered its forecast for global light vehicle production, citing a sluggish global economy and strained auto supply chains. The estimate of world production of light vehicles in 2022 and 2023 has been reduced by 2.6 million units.
Europe was particularly affected by its dependence on Russia and Ukraine. Volkswagen has warned they will soon have to make similar cuts. While the global microchip shortage has finally eased, automakers have not returned to normal production. In the first half of 2019 alone, 60 billion dollars are lost. At the same time, consumers have to settle for less.
“The Impact of Supply Shortages: Automakers Struggle to Meet Demand Amidst Limited Premium Models and Rising Prices”
Premium models are in short supply, and backorders must be met. As the supply of semiconductor chips grows, automakers are struggling to keep up with the demand for new cars. Manufacturers are resorting to stripped-down features to stay afloat, which in turn means consumers have less choice and have to pay more. As new car prices continue to rise, sales figures reflect these rising prices. Last month, the average new car transaction was 8% higher than a year ago. New car sales have declined since recovering from the global financial crisis, according to the Kelley Blue Book. The August drop marked the lowest new car sales since the recovery from the global financial crisis. Production does not normalize.
“Navigating the Ongoing Chip Shortage: Challenges and Future Implications for the Auto Industry”
While the chip shortage may help the auto industry in the short term, it doesn’t mean normal car buying will resume. Experts predict a new chip shortage in 2022. Some automakers have already stopped producing popular models, while others have scaled back production. Chips are required for new models, so the chip shortage could be even greater. Therefore, automakers need to make their next decisions now to avoid further problems. The shortage of chips is one of the biggest challenges for the auto industry.
Earlier this month, the Automotive Industry Association (AAA) reported that the world produced 500,000 fewer vehicles than expected in the first six weeks of 2022. This shortage has hit North America hardest, causing automakers like Ford and Toyota to halt production of certain models. Toyota also recently revised its operating profit guidance after its profit fell 21% in the previous quarter. Even Japanese automakers like Subaru and Mazda have a hard time producing cars. Chip bottlenecks have led to week-long production stops at many car manufacturers in the first half of the year.
GM is also facing similar problems. Due to the lack of chips, it was not possible to offer some functions on some of its models. However, the company’s North American production lines are no longer experiencing downtime despite the slowdown in production. Additionally, it has resumed second shifts at several of its assembly lines, including plants in Fairfax, Kansas, and Ramos Arizpe, Mexico, which make Chevy Blazers and Equinox SUVs.