Manufacturing, News

GLOBAL car-makers, burdened by production constraints caused by the shortage of semiconductors, are selling fewer vehicles but making more money, according to a report by Datium Insights.

In its September review, Datium said the lift in profits is caused mainly by the reduced cost of producing high volumes of vehicles. There are also less costs associated with advertising and marketing, and reduced overheads in logistics. 

In addition, because of the demand to get into newer cars, there are opportunities for car makers to focus on the more expensive, high-spec models that bring bigger returns. 

Around the globe, Datium notes that Japanese production was down 10 per cent in July; South Korea’s output fell eight per cent; the US was down 25 per cent in August; German production was 26 per cent lower; the UK output fell 25 per cent; while China’s volumes grew by four per cent.

COVID-related issues and the chip shortage hit at electric vehicle production which requires up to 10 times the number of semiconductors than conventional cars – 300 for an average petrol or diesel vehicle and 3000 for an EV.

The world’s biggest car-parts supplier, Bosch, has told CNBC that semiconductor supply chains in the automotive industry “are no longer fit for purpose.”

CNBC quoted Bosch management board member Harald Kroeger as saying that supply chains have buckled in the last year as demand for chips in everything from cars to PlayStation 5s and electric toothbrushes has surged worldwide.

In Germany’s case, it directly affected its growing EV production. In July this year, 27.1 per cent of cars made in Germany were EVs, Datium stated.

In July this year, UK car production fell to its lowest July level since 1956, said the Society of Motor Manufacturers and Traders (SMMT). 

Production was only 53,438 vehicles for the month, 37.6 per cent down on the same month in 2020.

It blamed the semiconductor shortage, factory shutdowns and worker absences amid the ongoing coronavirus pandemic.

The SMMT said that while July was a shocker, UK car production is still up 18.3 per cent year-to-date compared to 2020, when COVID restricted people attending work.

SMMT chief executive Mike Hawes said in a statement that the figures “lay bare the extremely tough conditions UK car manufacturers continue to face.”

Like Germany, the UK production has been hit by needing more semiconductors to suit the growing EV output.

About 26 per cent (126,757 units) of the cars built by UK manufacturers in July were either battery EV, plug-in hybrid, or hybrid – a record – said the SMMT.

Other car-makers, including Volvo, Volkswagn and Toyota, have all announced they will have to reduce production further if there is not an urgent solution to the chip crisis.

Further problems may be down the track for EVs because of a tightening of rare-earth minerals needed for the batteries.

In one case, experts believe there will be a global shortage of nickel, a vital metal in the manufacture of electric motors and batteries.

By Neil Dowling

Manheim
Manheim
Manheim
Gumtree
AdTorque Edge
DealerCell
MotorOne
Gumtree
PitcherPartners
Schmick