Global Automotive Industry Struggles Amidst Ongoing Chip Shortage
Apr 03, 2023
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The global automotive industry continues to grapple with a severe chip shortage, a problem that has persisted since the onset of the COVID-19 pandemic. Recent data highlights the extent of the crisis: Ford Motor Company's total sales for the first quarter of this year reached 432,100 units, a 17.1% year-on-year decline. March alone saw a sales drop of 25.6%, down to 159,300 units. The primary culprit behind these significant declines is the sustained shortage of automotive chips.- Globally, from the start of the epidemic, there has been an unrelenting "chip drought," with the automotive industry being particularly heavily hit. Microcontrollers and automotive-grade chips are currently in low supply in the car industry, causing regular shortages. This scarcity has forced several automakers to stop manufacturing or postpone delivery. For instance, Volkswagen faced a short-term production halt in December 2020 due to a shortage of specific automotive electronic component chips. Similarly, the Japanese auto industry is facing unprecedented challenges, with new car sales in Japan for the fiscal year ending March 2021 hitting a 45-year low of 4.21 million units.
- The lack of chips, according to AutoForecast Solutions (AFS), caused the global automotive sector to curtail production by over 10.2 million vehicles in 2021. Automakers all throughout the world are responding to this dilemma by implementing a variety of solutions to manage the strain on the global supply chain.
- Firstly, the "deliver now, supplement later" approach has become a priority for many automakers. For example, Ford announced that it would sell vehicles temporarily lacking some non-safety-critical chips and promised to provide the chips to dealers for installation within a year. This strategy enables automakers to continue manufacturing while guaranteeing that consumers may utilize their cars on time without sacrificing safety.
- Secondly, internal resource allocation is a key strategy. Automakers are pausing the production of some low-end, low-profit models to prioritize high-end, high-profit models, maximizing the company's overall benefits.
- Additionally, many traditional automakers are opting for "de-contenting" as a crisis management strategy. This is taking some features out of cars while they are being made in order to lower the demand for chips and guarantee on-time delivery. For example, Mercedes-Benz has lowered the central processing unit configuration in most of its models; some Audi models now come with one remote key and one mechanical key instead of two remote keys; BMW has temporarily removed touch screen functionality from certain models. These adjustments are often accompanied by corresponding economic compensation for customers.
- Furthermore, boosting self-sufficiency has become imperative. With no immediate resolution to the chip shortage, many automakers are collaborating with chip suppliers to develop new chips or investing in automotive chip development.
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- Electronic chip distributors such as XRS are working nonstop to help clients worldwide, in addition to automakers who are trying their best to lessen the effects of the chip scarcity. A vast array of automotive-grade components and matching services are offered by XRS. We aggressively provide substitutes electronic parts in the event of part shortages to help reduce project delays related to the production of automobiles. We are prepared to help clients who are experiencing supply shortages because we currently have a sizable quantity of components in stock.
- In conclusion, the automotive industry is still put to the test severely by the "chip shortage". Automobile enterprise company need to reevaluate their brands, continuously monitor production processes, investigate market demand, and maintain a positive and expectant outlook in order to weather this blow. Similarly, as chip distributors, they also need to think about solutions as much as possible in the context of chip shortages to ensure that the industry continues to move forward in difficult times.
