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Chip Famine Shows No Signs of Abatement, Automakers in a Fix
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It’s been a year since the auto industry has been mired in the global chip crunch. Mounting shortage of semiconductor supply threw the industry in disarray in 2021. Carmakers scrambled to procure chips, which forced them to undergo production cuts, idle factories and furlough employees. Chip crisis is expected to have cost automakers $210 billion in revenues in 2021. It seems like 2022 will be no different, if not worse.
Chip-Related Hiccups Continue for Auto Majors
The global chip deficit continues to cause disruptions, with auto biggies suspending operations at plants and cutting production targets. Yesterday, U.S. auto giant Ford (F - Free Report) stated that it is idling the Flat Rock Assembly plant for a week amid supply-chain snarls. Japan’s #1 automaker Toyota (TM - Free Report) announced yesterday that it is slashing the output target for the month of February by around 20%. The company acknowledges that is struggling to meet the surging demand owing to semiconductor shortfall and has adjusted its February production plan by around 150,000 units to 700,000 units globally. Next month, TM is suspending operations in Japan for several days across 11 lines in eight plants.
Taking into account the latest revision of output targets, Toyota now expects fiscal 2022 (ending Mar 2022) output to be lower than the previous forecast of 9 million units. Ford is expected to have lost nearly 700,000 units of 2021 production as a direct consequence of the chip crisis.
Stellantis (STLA - Free Report) notified recently that Windsor and Brampton assembly plants would be down through Jan 21 and Jan 26, respectively. The Windsor plant manufactures Chrysler minivans, while the Brampton facility makes Dodge muscle cars. Also, the firm’s Toluca plant has been idle since Jan 3 and will be down till this week.
Last month, Stellantis’ CEO Carlos Tavares said, “visibility into the shortage of semiconductors continues to remain a challenge for the industry, which expects the scarcity to continue for months still.”
Yesterday, the European Automobile Manufacturers Association (“ACEA”) released passenger car registration data for December and full-year 2021. In a telling sign that the chip shortage has hobbled the auto industry, European car sales hit a new low last year. Registrations of new passenger cars in the European Union (EU) plunged 22.8% in December to 795,295 units, representing the sixth straight month of decline.
For the full year, sales slid 2.4% to 9.7 million units, marking the worst performance since statistics began in 1990, per the data from ACEA. Quoting ACEA, “This fall was the result of the semiconductor shortage that negatively impacted car production throughout the year, but especially during the second half of 2021.”
This follows the historic slump of 23.7% in EU car sales in 2020. In 2020, new passenger car registrations in the EU totaled 9.9 million units, reflecting a decline of 3 million units from 2019 levels.
Little Respite in Sight
Chip constraints will remain a major bottleneck this year as well. There are no signs of the easing of chip issues, at least till first-half 2022. Some experts expect the shortage to linger in 2023 as well. Looking at the present scenario, it’s anybody’s guess how quick the auto industry will recover from the chip crisis.
AutoForecast Solutions anticipates the chip shortfall to result in a global output cut of more than 832,000 vehicles by 2022-end. Region-wise, Europe is expected to bear the maximum brunt, followed by North America. AutoForecast predicts output cut of 331,000, 186,000 and 108,100 units in Europe, North America, and China, respectively.
Also, it wouldn’t be wrong to say that the disruption due to the shortage of semiconductor supply couldn’t have hit the auto market at a worse time, as the industry is currently undergoing a massive transformation, thanks to decarbonization goals and the growing popularity of electrification and autonomy. Technological advancements are changing the dynamics of the auto industry and semiconductors are at the heart of technology. Basically, chips matter to automakers in a big way but the companies need to brace themselves for a tough road ahead in 2022. Nonetheless, the crisis has at least prompted automakers to rethink their logistics and supply chains.
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Chip Famine Shows No Signs of Abatement, Automakers in a Fix
It’s been a year since the auto industry has been mired in the global chip crunch. Mounting shortage of semiconductor supply threw the industry in disarray in 2021. Carmakers scrambled to procure chips, which forced them to undergo production cuts, idle factories and furlough employees. Chip crisis is expected to have cost automakers $210 billion in revenues in 2021. It seems like 2022 will be no different, if not worse.
Chip-Related Hiccups Continue for Auto Majors
The global chip deficit continues to cause disruptions, with auto biggies suspending operations at plants and cutting production targets. Yesterday, U.S. auto giant Ford (F - Free Report) stated that it is idling the Flat Rock Assembly plant for a week amid supply-chain snarls. Japan’s #1 automaker Toyota (TM - Free Report) announced yesterday that it is slashing the output target for the month of February by around 20%. The company acknowledges that is struggling to meet the surging demand owing to semiconductor shortfall and has adjusted its February production plan by around 150,000 units to 700,000 units globally. Next month, TM is suspending operations in Japan for several days across 11 lines in eight plants.
Taking into account the latest revision of output targets, Toyota now expects fiscal 2022 (ending Mar 2022) output to be lower than the previous forecast of 9 million units. Ford is expected to have lost nearly 700,000 units of 2021 production as a direct consequence of the chip crisis.
Stellantis (STLA - Free Report) notified recently that Windsor and Brampton assembly plants would be down through Jan 21 and Jan 26, respectively. The Windsor plant manufactures Chrysler minivans, while the Brampton facility makes Dodge muscle cars. Also, the firm’s Toluca plant has been idle since Jan 3 and will be down till this week.
Last month, Stellantis’ CEO Carlos Tavares said, “visibility into the shortage of semiconductors continues to remain a challenge for the industry, which expects the scarcity to continue for months still.”
While Ford sports a Zacks Rank #1 (Strong Buy), Stellantis and Toyota carry a Zacks Rank #2 (Buy) and #3 (Hold), respectively, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chip Crisis Drags Down EU Car Sales to Record Low
Yesterday, the European Automobile Manufacturers Association (“ACEA”) released passenger car registration data for December and full-year 2021. In a telling sign that the chip shortage has hobbled the auto industry, European car sales hit a new low last year. Registrations of new passenger cars in the European Union (EU) plunged 22.8% in December to 795,295 units, representing the sixth straight month of decline.
For the full year, sales slid 2.4% to 9.7 million units, marking the worst performance since statistics began in 1990, per the data from ACEA. Quoting ACEA, “This fall was the result of the semiconductor shortage that negatively impacted car production throughout the year, but especially during the second half of 2021.”
This follows the historic slump of 23.7% in EU car sales in 2020. In 2020, new passenger car registrations in the EU totaled 9.9 million units, reflecting a decline of 3 million units from 2019 levels.
Little Respite in Sight
Chip constraints will remain a major bottleneck this year as well. There are no signs of the easing of chip issues, at least till first-half 2022. Some experts expect the shortage to linger in 2023 as well. Looking at the present scenario, it’s anybody’s guess how quick the auto industry will recover from the chip crisis.
AutoForecast Solutions anticipates the chip shortfall to result in a global output cut of more than 832,000 vehicles by 2022-end. Region-wise, Europe is expected to bear the maximum brunt, followed by North America. AutoForecast predicts output cut of 331,000, 186,000 and 108,100 units in Europe, North America, and China, respectively.
Also, it wouldn’t be wrong to say that the disruption due to the shortage of semiconductor supply couldn’t have hit the auto market at a worse time, as the industry is currently undergoing a massive transformation, thanks to decarbonization goals and the growing popularity of electrification and autonomy. Technological advancements are changing the dynamics of the auto industry and semiconductors are at the heart of technology. Basically, chips matter to automakers in a big way but the companies need to brace themselves for a tough road ahead in 2022. Nonetheless, the crisis has at least prompted automakers to rethink their logistics and supply chains.