DAVID FURLONGER: Car production delayed by the global microchip crisis

Are you wondering why that sexy new car you ordered recently hasn’t been delivered yet? You’re not alone.

Global motor companies have cut vehicle production by over 6-million units so far in 2021 because of a shortage of semiconductor microchips, say analysts. The figure for the full year could reach nearly 8-million.

In SA, manufacturers and motor dealers say they can’t meet market demand for some vehicles because of limited stock. Imported models are most at risk, but local manufacture has also been affected. Industry attempts to quantify volume losses this year were abandoned after individual companies wouldn’t share numbers.

Suggestions that SA should make its own microchips to feed the local motor industry have so far received short shrift from motor companies, who say it is more cost-effective to import from overseas factories, where production is counted in the hundreds of millions. Whether the current crisis will cause a rethink, remains to be seen.  

What is clear is that SA is better off than some markets. A US company, AutoForecast Solutions, expects North American vehicle production to fall short of target by 2.4-million this year, European by 2.3-million and Chinese by 1.3-million. Compared with those, and with the expected 1.3-million loss in the rest of Asia, the total of 62,000 for the whole of the Middle East and Africa appears insignificant.

That’s just manufacture. As Subaru Southern Africa pointed out in this column last week, the microchip-generated shortage of imported vehicles is disrupting market planning and customer deliveries. Other companies, including local manufacturers who import products they don’t build locally, report similar problems.

In Japan, Toyota announced last week its planned global car production during September could be reduced from 900,000 to 500,000 because it has run out of microchips. The company has avoided major cutbacks until now because it stockpiled chips before the crisis began.

Volkswagen said staff at its biggest factory, in Wolfsburg, Germany, would work only one daily shift this week instead of the usual three. Describing the semiconductor situation as “volatile and tight”, the company told the Reuters news agency: “We can’t rule out further changes to production.”

Also in Germany, Ford suspended manufacture of its Fiesta car. Volvo and Stellantis – the latter the amalgamation of Peugeot, Citroën, Fiat and Chrysler – have both just announced new cutbacks in Europe. Some of the lost production would have been exported to SA.

Nearly all the world’s motor companies are affected by the shortage. General Motor is a significant casualty. BMW said recently it was downgrading electric-vehicle production forecasts. Ford global CEO Jim Farley calls the shortage “probably the biggest supply shock” he has ever seen.

Microchips are a core component in modern vehicles. They control engine management, safety, entertainment and information systems, and many other activities. At one manufacturer there’s a shortage of chips for door controls.

When Covid forced the world into lockdown last year, loss of sales forced motor companies to cancel orders for millions of chips. The chips were immediately snapped up by manufacturers of smartphones, laptops, watches, gaming systems, refrigerators and myriad other products that use them.

Chip-makers were already struggling to meet demand from a growing number of industries, so when motor companies came calling again as sales recovered, their expected supply was no longer there.

The motor industry isn’t the only one to suffer – manufacturers of smartphones and video-game consoles are among others to lose out – but it is arguably the worst hit.

The problem has been exacerbated by problems at major suppliers, many of them in Asia. Drought and Covid outbreaks are among the issues that have caused companies to either slow or suspend production.

Taiwan Semiconductor Manufacturing Co, the world's largest contract chipmaker, says that despite predictions that the shortage is about to ease, it will continue into 2022. More optimistic forecasts suggest that investments in new production capacity will enable supply to match demand by the end of this year.

Whoever is right, SA car buyers will have to accept potential delivery delays on some models for a few more months. SA is a small cog in the global motor industry sales wheel, so it won’t always be a priority when stock of affected vehicles becomes available.

Local motor companies and their dealers say all orders will be honoured. The only question is, when?