Without enough chips for everyone, automakers shut down production

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Illustration from article titled The Global Chip Shortage Has Fully Affected the Automotive Industry

Photo: François Lo Presti / AFP via Getty Images (Getty Images)

Semiconductor shortages have hit the auto industry, and apparently no company is exempt. the Associated press, Reuters and Bloomberg all have reported in recent days that various manufacturers have been forced to delay or block production of vehicles due to a lack of chips, which are more critical than ever in modern cars to keep everything running from in-car entertainment assisted driving functions, etc. .

Ford is temporarily shutting down its Louisville plant this week, where the Escape and Lincoln Corsair are built. Nissan is cutting production at its plant in Oppama, Japan, where it manufactures the Note. Fiat Chrysler is suspending operations at its plants in Brampton, Ontario and Toluca, Mexico, pertaining to the Jeep Compass, Chrysler 300 and Dodge Charger and Challenger, while Toyota is limiting production of Tundra at its plant in San Antonio.

General Motors said CNBC it has not yet had to adjust the activity of its factories, but it is “monitoring the situation closely,” according to company spokesman David Barnes.

Industry is not alone facing the ramifications of silicon shortages. The same reason you will find fewer cars on the dealership lots is the same reason you will have a hard time finding that laptop or gaming console you were considering. For automakers in particular, the problem was exacerbated because chipmakers initially focused on responding to growing demand for consumer electronics at the start of the pandemic, as we all got stuck. with us. As the AP explains:

Industry officials say semiconductor companies have diverted production to consumer electronics during the worst of the COVID-19 auto sales slowdown last spring. Global automakers have been forced to close factories to prevent the spread of the virus. When the builders recovered, there weren’t enough chips.

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Lack of resources has also forced automakers to prioritize the production of volume sellers and vehicles with wider profit margins, while shifting efforts to less popular models. Expect a larger inventory of trucks, SUVs, and crossovers, a smaller inventory of sedans.

And if the effects of demand exceeding supply weren’t severe enough, government sanctions are also bending the knife. Last month the United States blacklisted by Semiconductor Manufacturing International, China’s largest chip maker, based on suspected ties to the Chinese military. Companies that use American-made components are prohibited from doing business with the chipmaker, forcing them to find other suppliers at a time when chipmakers are already overburdened.

Car sales in the United States fell 15% last year compared to 2019, which wasn’t as bad as many had predicted earlier in 2020. Dealers have been operating for some time with about a quarter less new inventory than they typically would, which has drives up used car sales. Continuing bottlenecks like this global semiconductor shortage ensure that the trend will not change for the better anytime soon.

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