The auto industry could be feeling the effects of the chip shortage until 2023

midian182

Posts: 7,306   +65
Staff member
In a nutshell: While most tech insiders believe the chip shortage will alleviate in the second half of next year, automotive analysts are worried their industry will not see a recovery phase until the first half of 2023.

The global semiconductor shortage has been felt by many, from those whose jobs have been directly impacted to consumers wondering when they’ll be able to buy a new graphics card/console/anything with a chip in it. One of the hardest hit has been the automotive industry, which consulting firm AlixPartners believes will suffer a $210 billion hit in 2021 alone—double the amount predicted in May.

According to a new forecast from IHS Markit (via Automotive News), inventory shortages and higher prices will likely be plaguing car makers until the first half of 2023, at which point it will enter a recovery phase.

Part of the problem is that car manufacturers cut back production and reduced their chip orders at the start of the pandemic, and were unable to secure supplies a few months later when sales started picking up again.

The one piece of good news is that IHS predicts chip supplies will stabilize in the second half of 2022. That timeframe aligns with what Lisa Su, Acer, Xbox Boss Phil Spencer, and analyst firm IDC believe. Sadly, it means we’ve got several more months of this unprecedented crisis to endure.

CNET writes that many people looking to buy a new car are simply giving up because of the challenges brought about by the chip shortage, including low stock and higher costs—something those looking to buy a new graphics card can relate to. It’s also led to frustrated brand loyalists looking elsewhere for new vehicles. IHS forecasts that automakers’ production capacity will fall 6.2% this year, equal to 5 million fewer cars being created.

The latest revelation related to the chip shortage came from TSMC, whose chairman claims that some companies are stockpiling chips.

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Burty117

Posts: 4,272   +2,361
I mean, car manufacturers have been loving the current situation, cheap models have completely disappeared and they're all making more money than ever.

They've basically increased prices and concentrated on selling higher end models, completely removing lower end cars (Ford Ka as an example) and massively lowered how much discount forecourts can sell them for.

Just look at the financials, Toyota made their biggest operating profit ever in the first half of this year, $9 billion to be precise.
 

Revolution 11

Posts: 89   +100
I mean, car manufacturers have been loving the current situation, cheap models have completely disappeared and they're all making more money than ever.

They've basically increased prices and concentrated on selling higher end models, completely removing lower end cars (Ford Ka as an example) and massively lowered how much discount forecourts can sell them for.

Just look at the financials, Toyota made their biggest operating profit ever in the first half of this year, $9 billion to be precise.
I am not too worried about the long term, it's a self-solving problem. The car market has enough competitors that when margins increase (like right now), the manufacturers try to expand volumes to increase profits. Eventually supply catches up to demand and inventories start building again. Discounts will return to move that volume.

Unlike semiconductors where there are only 3 main fabrication companies, there are at least 14 major global automakers. The fact that they are complaining about billions of lost profit shows that they desperately want to increase volume to beat their competitors in the race for market share, especially when margins are high.

Housing is a product sector I am much more worried about. It has been systematically under-built for a few decades and I don't see the structural factors changing anytime soon.
 

Theinsanegamer

Posts: 2,854   +4,532
I mean, car manufacturers have been loving the current situation, cheap models have completely disappeared and they're all making more money than ever.

They've basically increased prices and concentrated on selling higher end models, completely removing lower end cars (Ford Ka as an example) and massively lowered how much discount forecourts can sell them for.

Just look at the financials, Toyota made their biggest operating profit ever in the first half of this year, $9 billion to be precise.
Toyota was also one of the few that didnt take "eliminate excess inventory' to mean" eliminate ALL inventory" and was also one of the few that didnt cut orders of chips last year. As a result they've been one of the few brands to actually have vehicles to buy, and have profited massively as a result.
 

p51d007

Posts: 2,905   +2,279
If ldiot vehicle manufacturers would go back to "analog" stuff in vehicles it wouldn't be so much of an issue. I remember when you could purchase a "farm truck", one that had vinyl seats, no AC, no radio, roll down windows, 3 on the tree for a couple thousand dollars.
Now, a "CHEAP" truck will set you back 20,30 grand.
 

Neatfeatguy

Posts: 572   +1,006
I don't know....I hear a lot about "shortages" for car dealerships, but as I drive past the Ford dealership just down the road from me, every day, their parking lot is full of new and used cars.

Granted, it's just one dealership I frequently see, so there's a very good chance I'm only seeing a small part of the picture and this particular dealership is one of the few not having inventory issues.....

Thankfully I got a new (used) car just about 2 years ago and the wife got a new (used) car a year ago before "shortages" started becoming the norm.

Furniture, on the other hand, is having massive delays due to ports being backed up and lack of transportation drivers to move things. I've been told a lot of furniture that's not available in stock for a store can take upwards of 6-12 months before inventory will come in.
 

Burty117

Posts: 4,272   +2,361
Toyota was also one of the few that didnt take "eliminate excess inventory' to mean" eliminate ALL inventory" and was also one of the few that didnt cut orders of chips last year. As a result they've been one of the few brands to actually have vehicles to buy, and have profited massively as a result.
That's not how it's worked out though, it wasn't just Toyota:
Toyota:
9 Billion Profit
12.5% margins

Stellantis:
11.4% margins (they don't even have a premium brand)

Daimler:
5.2 billion profit
12.2% margins

BMW 15.8% margin according their Q2 reports.

CBA to look up the rest but those are huge compared to just 10 years ago. I don't think the car manufacturers are struggling as much as the media are trying to convince us they are.
Housing is a product sector I am much more worried about. It has been systematically under-built for a few decades and I don't see the structural factors changing anytime soon.
This is a much more interesting topic to talk about, I too am very worried. I basically dream of owning a house... It's actually worse than that, I dream of being able to get a mortgage to get a house.

I think what's happening in China at the moment is what will eventually happen over in the west. How far the government can kick this can down the road, maybe 10 years but probably less.
 

Uncle Al

Posts: 8,372   +7,180
While there is an incentive for car makers to prolong the chip shortage, they loose far more money from lack of sales. It might work for a month or two but after than the car makers are taking it on the chin and there simply are not nearly enough usable used cars out there to sustain demand. The simple answer is the "Global Marketplace" is now realizing how just one slow down in any supply chain can have drastic effects, not only on that supply chain but on parallel chains that are indirectly affected.

That being said, there are also more than a few companies that imply greed in their formula and gouge the customers and with a very weak Consumer Protection Agency it is impossible to investigate or prosecute most of them. The real answer will be, yet again, the buying public that needs to put their foot down and demand goods and services at a reasonable price or black-ball the seller and spread the word. The consumer has the greatest pressure, it's just a matter of how long we can last .....
 

Revolution 11

Posts: 89   +100
That's not how it's worked out though, it wasn't just Toyota:
Toyota:
9 Billion Profit
12.5% margins

Stellantis:
11.4% margins (they don't even have a premium brand)

Daimler:
5.2 billion profit
12.2% margins

BMW 15.8% margin according their Q2 reports.

CBA to look up the rest but those are huge compared to just 10 years ago. I don't think the car manufacturers are struggling as much as the media are trying to convince us they are.

This is a much more interesting topic to talk about, I too am very worried. I basically dream of owning a house... It's actually worse than that, I dream of being able to get a mortgage to get a house.

I think what's happening in China at the moment is what will eventually happen over in the west. How far the government can kick this can down the road, maybe 10 years but probably less.
I don't think this changes what my post is claiming however. The higher margins will make it more enticing for automakers to expand volume and claim more profits. This will lead to more supply and prices coming back to sanity.

If there were only 4 automakers, you could do some sort of price fixing and production controls. I have never seen price fixing occur where there are more than 6 separate corporate entities. We have 14 automakers, I am not worried about coordinated supply limitations.
 

mbrowne5061

Posts: 1,949   +1,133
I think what's happening in China at the moment is what will eventually happen over in the west. How far the government can kick this can down the road, maybe 10 years but probably less.

China and the west have the exact opposite for housing problems though.

The west isn't building enough because NIMBYs, so prices stay sky-high, driving banks to offer long-term, low-rate loans (so you never actually own the property outright in your lifetime). If the population declines at all (which it will), then the value of housing will fall as demand drops - leaving a lot of people upside-down on their house that has multi-decade mortages on it.

China is build too much housing, but everyone has been buying it as if there was a housing scarcity. Lot of people on second and third "homes" that they never even step foot in - or may never even seen built - that they bought with the idea "housing always goes up" and eventually they would sell these home that 'would be' worth more. So instead of one large mortage that is worthless, they will end up with a bunch of smaller 99yr leases from the government and no way to off-load those leases because their population is also declining.