Affected by the chip shortage, global automobile production continues to reduce

Latest update time：2021-10-18 17:59

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Toyota said it will cut production of up to 150,000 vehicles due to an ongoing semiconductor shortage and restrictions related to the Covid-19 pandemic.

The automaker will idle five plants in its native Japan on certain days in November, affecting production of popular brands including the Corolla and Camry.

Toyota began cutting production in August due to the chip shortage and said, "We expect the semiconductor shortage to continue for a long time."

The company in May celebrated its business philosophy, often referred to as the "Toyota Way," for helping it steer clear of past woes such as chip shortages and earthquakes.

But reality soon set in, with Toyota issuing announcements about production cuts in August and September.

The company can now use its unique Toyota cheerleaders when the chips are reduced. But the cheerleaders don't make chips.

Toyota said it expects to increase production in November to make up for an initial shortfall after cutting production in previous months due to chip shortages. They are also working to strengthen the supply chain to deliver cars to customers.

The chip supply chain struggle has also affected India's Tata Motors, which owns the Jaguar Land Rover brand. The company reported earlier this month that it sold 92,710 Jaguar Land Rover vehicles in the quarter ending September 2021, down 18.4% from the same period last year.

The company said in a filing with the U.S. Securities and Exchange Commission that it was noticing strong demand for its vehicles but that the chip shortage was impacting operations.

“Global semiconductor supply issues represent a significant near-term challenge for the industry that will take time to resolve,” Jaguar Land Rover Chief Commercial Officer Lennard Hoornik said in the filing.

Automakers are now designing their own chips to have more control over parts supply. This is similar to what Apple has done for its devices by moving chip design in-house and reducing its reliance on Intel CPUs and Imagination technology.

Elon Musk said at a shareholder meeting earlier this month that Tesla designs its own chips and is a hardware and software company that makes technology products, not just a car company.

Hyundai Motor reportedly said it would design chips in-house and reduce its reliance on chipmakers.

Intel, Qualcomm and Nvidia are among the companies that supply chips to automakers.

EU new car sales fall in September due to chip shortage

The European Automobile Manufacturers Association said on Friday that passenger car registrations in the European Union fell in September due to the current shortage of semiconductors.

New car registrations, which reflect sales, fell 23% to 718,598 units in the month from a year earlier, the association said, with major EU markets including Spain, France, Italy and Germany reporting sharp declines.

"The decrease in sales was mainly due to insufficient vehicle supply caused by the ongoing semiconductor shortage," the association said.

Meanwhile, the association said new passenger car registrations across the European Union rose 6.6% to 7.5 million in the first nine months of the year.

Volkswagen AG (VOW.XE) said on Friday that vehicle deliveries fell in the third quarter as a shortage of semiconductors hit global auto production.

The German carmaker said total group vehicle deliveries to customers fell 24.5% to 1.97 million in the three months to September. But in the first nine months of the year, global group deliveries rose 6.9% to 6.95 million.

Before Volkswagen released its delivery figures, German peers Daimler AG (DAI.XE) and Bayerische Motoren Werke AG (BMW) also reported earlier this month that their quarterly car sales were hit by chip shortages.

Daimler said global sales at the automaker's Mercedes-Benz cars division fell 30.5% to 434,784 vehicles in the three-month period, while global sales of BMW, MINI and Rolls-Royce cars at BMW AG fell 12% year-on-year to 593,189 vehicles.

Chip shortage may cause China to reduce automobile production by 2 million units

From May to September this year, China's automobile production and sales have declined year-on-year for five consecutive months, and the annual production may be reduced by nearly 2 million vehicles.

According to China Business News, Chen Bin, executive vice president of the China Machinery Industry Federation, said at the "2021 China Automotive Supply Chain Conference" held on October 15 that chips, which have not received enough attention in the automotive supply chain in the past, have had a huge impact on China's auto production and sales. From May to September this year, China's auto production and sales have fallen year-on-year for five consecutive months. Based on this speculation, it is possible that the annual production will be reduced by nearly 2 million vehicles.

Chen Bin also pointed out that the impact of the chip shortage has also spread to many manufacturing fields in China, such as mobile phones, machine tools, home appliances, and laptops. The shortage of some high-end chips has even spread to China's measurement, control, testing, and inspection instrumentation industries, becoming a "stumbling block" restricting the innovative development of Chinese technology companies.

Bin pointed out: "We are a major automobile producer and consumer, and have been the world's number one in automobile production and sales for more than a decade. However, a 'chip' can affect our production and sales of millions of cars a year. The fragility of the automobile supply chain ecosystem is a concentrated reflection of the fragility of China's manufacturing supply chain ecosystem."

What is also worrying is that a series of products in the supply chain, such as industrial sensors, basic industrial software, special raw materials, and precision instruments, are heavily dependent on imports. Once natural disasters or man-made disasters occur, they may have a greater impact.

He pointed out that since the reform and opening up, China's manufacturing industry has made brilliant achievements, and every industry can come up with iconic products that are no less impressive internationally; but in the eyes of related industries, as long as it involves cross-border integration of mechatronics products, and involves high-end equipment that integrates manufacturing, materials, and information technology for innovative development, it is far from what the industry needs.

For example, people in the manufacturing industry believe that the machinery industry does not pay enough attention to special production equipment, special production lines, and special testing equipment, and instead focuses all its energy on major technical equipment and general equipment. As a result, the key equipment needed on corporate production lines is almost completely dependent on imports, which is particularly prominent in the automotive field. The electronics and information industry does not attach importance to the manufacturing of basic components and the research and development of basic industrial software, and instead focuses on the application end of consumer electronics and the information industry. As a result, high-end basic industrial components and development software such as chips and sensors are almost all imported.

However, people in the electronic information industry believe that these products are already global commodities. Even if they are successfully developed at great cost, no one may be willing to adopt new products, and they will instead purchase mature products from the international market. The input-output ratio of innovative enterprises is too low, so it is still difficult to break through.

Chen Bin also mentioned in his speech that some people in the manufacturing industry have said that some domestic products are unreliable, low-precision, and short-lived, which has a lot to do with the level of raw materials. Raw material industries such as steel and nonferrous metals only focus on the production of large-volume and wide-ranging products such as building materials, wires and cables, and aluminum alloy doors and windows. The requirements are not high but the operating benefits are good. However, the key special materials required by the equipment manufacturing industry have high parameter requirements and low demand. Raw material companies are reluctant to get involved because they cannot afford the high R&D and manufacturing costs, and almost all rely on imports.

Suppliers' technological progress needs to be continuously improved in practical applications, but they cannot get the trust and support of users. Innovative products are often required to have the same technical indicators as foreign ones, but the price and cycle are much lower than those of foreign suppliers. Users always feel that there is a gap between domestic products and foreign ones, and they are worried about being held accountable if problems arise, so they import if possible.

Chen Bin said: "It can be seen that all the breakpoints, blockages, difficulties and shortcomings in the supply chain reflected in the current development of China's manufacturing industry are ultimately caused by the lack of integrated development among industries and insufficient collaborative innovation. In the past development process, we did not attach importance to ecological collaboration and lacked the collaborative ability to build a supply chain ecosystem."

He believes that the fragility of the automotive supply chain ecosystem reflects that the biggest obstacle for China's manufacturing industry in building a supply chain ecosystem is institutional barriers, lack of integration, lack of coordination, and lack of trust. Departments have boundaries, industries have barriers, and companies have walls. Therefore, it requires the joint efforts of relevant national departments, relevant industries, and relevant companies to break the traditional thinking concepts, reform the original management model, work together, collaborate and innovate, break through departmental boundaries, break down industry barriers, open up corporate walls, integrate development, collaborate and innovate, and create a new automotive supply chain ecosystem.

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