Existing chip shortages and supply chain disruptions are impacting carmakers.
Car manufacturers are facing another year of difficulties, hurting profits and casting doubts on recovery into 2023. Carmakers were already grappling with a shortage of semiconductor chips that has now lasted for years, and are now also having to contend with a shortage of parts coming out of Ukraine, caused by Russia’s invasion at the end of February.
The semiconductor shortage started in March 2020 and hit car manufacturers particularly hard, for a number of reasons. Despite efforts to build new supply chains and implement creative strategies to get around the shortage, such as changing software to reduce the number of chips needed, manufacturers have struggled to deal with the shortfall. As a result, millions of models have remained unfinished.
An end may be in sight for the global semiconductor shortage.
Experts predict that the situation will begin to ease by the end of 2022. Major chip producers like Intel have constructed new plants to ramp up production, which will begin to ease the strain. And as consumer demand drops for personal electronics begins to drop as life returns to normal after the pandemic, more chips will be available for carmakers. However, this light at the end of the tunnel has been overshadowed by another crisis.
War is disrupting the supply of components.
The war in Ukraine has major implications for carmakers around the world. Ukraine is one of the worlds largest producers of car parts, and when Russia invaded on the 28th of February exports of these parts quickly came to a halt. Manufacturers including Groupe Renault, BMW and Jaguar Land Rover were all forced to temporarily pause production. On top of this, the Russian market essentially disappeared overnight, and many manufacturers have pulled all their operations from Russia.
Carmakers are trying to find alternatives as fast as possible, with some trying to manufacture the necessary components in-house and others turning to suppliers in other parts of the world. Whilst these steps will help in the long run, they are not sufficient to address the immediate shortages, and as a result there are major backlogs in orders of new cars.