ISSUE 38 AUGUST 2021
THE VOICE OF THE NEW ZEALAND AUTOMOTIVE INDUSTRY
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The chips are down A GLOBAL SHORTAGE OF COMPUTER CHIPS IS AFFECTING PRODUCTION OF NEW CARS AND SALES OVERSEAS. THAT WAVE IS BOUND TO HIT HERE TOO global shortage of silicon-based computer chips is putting production at car factories on hold around the world, and waiting lists are getting longer. Ford in the US is expecting a US$2.5 billion hit and General Motors (GM), US$2 billion. Production in the US is already down 1.2 million vehicles since the start of the year. This will push up the price of new cars as dealers take advantage of the laws of supply and demand and there will inevitably be a flow-on effect in second-hand car prices. Car factories around the world are cutting back on shifts or stopping production of certain models, or shutting down for a week or more. One of the issues is that they are running out of storage space for uncompleted cars.
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FARMING OUT THE PROBLEM Ford in the US is considering sending incomplete vehicles to dealerships, shifting the onus for installing the chips — once they can get them — on to the dealers. Ford has been manufacturing vehicles without the missing semiconductor chips and storing them in yards in several states, but they are filling up. Ford
needs to make room so it can keep its factories running. It would offer training and pay the dealers for fitting the chips. Others are getting creative in different ways. Peugeot is apparently reverting to analogue dashboards instead of digital. That’s something, although it sounds more like a drop in the bucket than the answer to the problem. Modern cars have upwards of 50 microprocessor controllers in them and more than double that in luxury cars. Demand for them is increasing as the systems that will lead to autonomous vehicles are added to current cars in the form of more and more driver aids like lane-keeping assistance, blind-spot monitoring, active cruise control, automatic braking, and hands-free parking. In 2020, consulting company Deloitte reported that, as of 2017, electronics systems comprised 40 per cent of the cost of a new car. The cost of the base semiconductors used in those systems was roughly US$312 per car in 2013, and it expected that to double by 2022. Deloitte will be revising those numbers now.
SALES DIP While the supply shortage has been forecast since the third-quarter last year, it is now appearing in sales figures. Numbers collated by the US’s data and analytics company Black Book show that the US’s new car sales for June were down about 14 per cent compared with 2019, which offers a more relevant comparison than lockdown-hit 2020. This was the first month in which the shortage affected actual sales. The chart on page 4 shows the average number of new listings, using a two-week moving average, showing that the number of new vehicles available in the marketplace has dropped substantially.
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