The world is in the middle of supply chain problem. Company’s that are shipping out products are finding shipping containers left on loading docks or packages sitting in truck bays. This has impacted nearly every sector of the economy. And automakers hope they can find ways to offset any delays.
Ford and General Motors have closed assembly lines in recent months as the companies can’t get semiconductor chips necessary, Reuters points out. Semiconductor chips are in everything from tanks to toasters. The pandemic forced companies that produce these modern marvels to slow production. Now, with supply chain disruptions we’re in the middle of a full-blown shortage. This, along with rising steel costs, has automakers worried about their futures.
So far, though, Ford and GM have staved off declines in profits thanks to high demand for full-size trucks and SUVs, which have better margins for the makers, Reuters said. Even though sales are down across the board. But as vehicle production slowed or stopped in some instances, car dealerships are now running out of inventory.
“There is very little on dealer lots to actually sell,” says Sam Abuelsamid, an auto-industry analyst, to Consumer Reports. “If you anticipate needing a new car in the next six months, it’s probably best not to wait. Go ahead and place a factory order now.”
With the shortage comes rationing, and Abuelsamid said automakers will focus on newer vehicles at the expense of older models.
“What we can say for certain is that, in general, auto manufacturers are prioritizing their newer products,” he says. “Models that are three, four, five years into their production cycle are going to be less likely to get parts for production. Newer and higher-volume vehicles — trucks, newer SUVs, EVs — those are going to get priority.”
Ford, GM Not the Only Struggling to Cope
Reuters recently reported that automakers turned to the Biden administration for help. They want the government to subsidize new manufacturing outfits of superconductor chips in the United States. But getting one of those facilities at capacity will take years. And while Taiwan Semiconductor Manufacturing Company, the biggest manufacture of the chips in the world, said it is boosting production, that’s a multi-year process.
Worsening the issue is the demand for products that need these chips is greater than ever.
“The current chip shortage all starts with the unprecedented demand for personal computers and peripherals as the globe worked and attended school from home,” said Patrick Moorhead, an industry analyst told CNBC.
And the problem doesn’t seem to be letting up anytime soon. As the shortage worsens, companies like Ford and GM that need these chips will begin to fight over the few that are available, which will cause prices to rise.
“There is no sign of supply catching up, or demand decreasing, while prices are rising across the chain,” Neil Campling, media and tech analyst, told The Guardian. “This will cross over to people in the street. Expect cars to cost more, phones to cost more. This year’s iPhone is not going to be cheaper than last year.”