Are microchip shortages affecting the new car industry?

How are microchip shortages affecting the new car industry?

Waiting for a new car? We mean, have you really been waiting for a new car? Like many customers in the new car market you will have noticed that lead times have not been the quickest. For cars, and vans, production has been somewhat affected by a number of things – although microchips are currently being identified as the leading protagonists for this unseemly event. The “semiconductor” chips are absolutely crucial to electronic devices, not just in vehicles but in many electronic devises we all use and need.

It is almost impossible to build new vehicles without these components and we have seen 8-12 week delivery times shift to 30-40 week times. This is now being made clear to the general public as a number of news outlets are writing stories about this issue, including the recent  Telegraph article  which identifies the new vehicle delays are pushing customers into used options (hence the incredibly high used values at present).

Additionally, a number of BBC articles have gently suggested that manufacturers are busy trying to find alternative options like   Land Rover  and  Mini . This isn’t a new topic and is one which has been ongoing for sometime now. We have just reached a point where it is now starting to bite.

What has also compounded this issue has been COVID, the Suez canal crisis and the move to electrification. It is no surprise that COVID impacted many businesses, halting factories and logistics almost overnight. Moving out of COVID has been very tricky for many businesses in the automotive industry, as employees were prohibited from workplace operation and face to face selling was banned. The delay in parts and manufacturing was clearly palpable but this seemed to be less of an issue because it was anticipated less vehicles would be sold in the COVID culture.

Indeed this was true for the UK from March – June 2020 but as we became accustomed to the new environment, many of us experienced significant increases in business and order take. With customers unable to go on holiday, this allowed for more disposable income for new cars and the demand grew at an unbelievable rate. As was documented, a fairly recent blockage to the main shipping lines in the Suez Canal led to serve delays for many goods which were due to land in the UK and much of this has only just been resolved. If this wasn’t enough for manufacturers, one of the biggest transitions they have ever faced came to fruition – the move to EV.

2020 was a seminal year for EVs and this will be noted as the key tipping point for UK customers truly accepting, and mass-adopting, EVs. The issue is that manufacturers are not wholly set-up for manufacturing electric cars; quite simply they did not know how popular they would be and how many vehicles would be required. Unbelievably, demand grew at a rate well beyond supply, so lead-times (and prices) have been impacted. With the UK Government clearly backing the EV proposition, this is something which will only continue to grow. Manufacturers now need to adopt manufacturing at a large scale to manage the demand for EVs and this is not an easy task.

Are electric cars out-selling petrol and diesel?

Are electric cars now more popular than petrol or diesel? As you will note from the SMMT figures for July 2021,  July registrations were down compared to 2020, with “pingdemic” and semiconductors being blamed for this event . However, even though new car registrations declined, pure electric cars (described as BEVs) actually increased by 36.5% compared to 2020. Indeed, over 11,000 new EVs were registered in July 2021 compared to just over 8,500 diesel options.

However, this dwindles in comparison to the 55,250 new petrol cars which were registered. While it is heartening that nearly 10% of the registered vehicles were EVs, there is still some work to make EVs the foremost fuel choice for the UK’s personal and business leasing customer. As a starter, we need to overcome these delays, which are hoping to last no longer than 2021 so that mass production can recommence in 2022. However, we also have the added complication with EVs of charging infrastructure, customer and dealership education plus a clear indication of Government support.