► The car industry is facing another crisis
► A global chip shortage has forced several brands to slow production
► Everything you need to know
In the last 18 months, the car industry has had to weather the uncertainty of Brexit and a global pandemic – but there’s one further crisis that’s only just kicking in: a global microchip shortage. What started as an inconvenience for those looking to buy a PS5, Xbox or TV has now made its way to the car industry – and a lack of chips means brands such as JLR, Renault and VW are planning temporary shutdowns at some plants.
What and why is it happening?
The chip shortage is a triple-pronged problem, though the cause of two prongs can be traced back to coronavirus. Just like the car industry, the semiconductor industry was forced to partially shut down because of the pandemic, resulting in a smaller supply of chips than usual. And at the same time, the need for tech for home working, as well as the launch of two new gaming consoles – the PlayStation 5 and Xbox Series S/X – meant demand for those chips was higher than ever. And yes, those consoles will have made a splash – Sony estimates it sold 4.5 million units last year alone.
Finally, a fire at the Renesas Electronics factory – one of the largest semi-conductor makers for the automotive industry – plus a trade war, and severe weather in Texas haven’t helped matters, either.
Who is affected?
Cars are all now so technologically advanced that the crisis is affecting almost every manufacturer. However, not all car brands have made statements yet.
At this year’s annual press conference, CEO Herbert Diess revealed VW was unable to build 100,000 cars due to the chip shortage in 2020 – and that number won’t be clawed back in 2021, either. Just weeks later, VW's boss described the car maker as in 'crisis mode', and predicted the semiconductor shortage will seriously impact profits in Q2 of 2021.
Tesla has also been affected by the chip shortage, with CEO Elon Musk describing Q1 2021 as having ‘some of the most difficult supply challenges we’ve ever experienced.’
Zach Kirkhorn, Tesla’s CFO said the company would ‘continue to work through the instability of the global supply chain, particularly around semiconductors and port capacities’.
Jaguar Land Rover
Jaguar Land Rover has already revised its production schedule for two of its three factories in the UK – Solihull production will continue. A statement read: ‘We have adjusted production schedules for certain vehicles which means that our Castle Bromwich and Halewood manufacturing plants will be operating a limited period of non-production from Monday 26 April.
‘We are working closely with affected suppliers to resolve the issues and minimise the impact on customer orders wherever possible.’
Ford’s UK component factories may be affected, but it’s already had to shut down its Otosan plant in Turkey.
The Blue Oval has admitted it'll produce 1.1million fewer vehicles this year than expected. As reported by the FT, the company had already predicted a shortfall of 200,000 to 400,000 but a revised forecast suggests production will be down 50% in Q2 – for an overall drop of 10% in the first half of the year.
‘Until now the impact of this global crisis has been minimised by the efforts of our main partner, Ford Motor Company, and the collaboration we have carried out with our suppliers,’ it said in a statement.
‘Nevertheless, following the recent developments it was decided to bring forward our annual planned summer shutdown and suspend production in our Gölcük plant from 19 April to 13 June due to the restrictions in the supply of some parts, where imported microchip use is intensive.’
Mercedes parent company Daimler is reducing the hours of up to 18,500 staff in its Bremen and Rastatt plants, in a move that should halt production but allow them to continue to work on special projects. The pause will last from 23 to 30 April.
‘Currently, there is a worldwide supply shortage of certain semiconductor components,’ a Daimler spokeswoman told Reuters. ‘We continue to play things by ear.
‘The situation is volatile, so it is not possible to make a forecast about the impact.'
Stellantis, the supergroup that includes Citroën, Peugeot, Jeep and Chrysler, has also been affected by the chip shortage – and has even begun to replace parts on certain models to get around it.
The group has revealed it’ll be changing digital speedos on new 308s to traditional analogue units – though the change will only kick in for vehicles arriving in May. There are chips still available, but there’ll be used on more popular models such as the 3008 crossover.
‘It's a nifty and agile way of getting around a real hurdle for car production, until the chips crisis ends,’ a spokesman for Stellantis told Reuters.
Renault has declined to make any forecasts for the next few months due to the uncertainty the chip shortage has produced. Chief finance officer Clotilde Delbos told the FT ‘We don’t want to give any estimates that might be wrong very quickly.
‘Two months ago, we said we think the peak will be in the second quarter, but we think there will be a lingering effect in the third quarter if not further. The visibility is deteriorating.’
How long until things are back to normal?
It's the question we always seem to be asking nowadays. First, it’s worth taking a look at the console market, as it’s one of the most chip-sensitive industries that exist and one of the first to be affected.
The general consensus is that the PS5 and Xbox Series X will only be simple to buy in late 2021 and early 2022 – and that serves as a good guide for the industry as a whole. Although production issues may not be as acute in a few months as they are now, it’s likely we won’t see true normality until next year.
We’ll update this article as the situation evolves.