Chip Shortages $450 Billion Hit to Auto Industry for 2021-2022

Seraph Consulting says there will $450 billion in lost global sales from the start of the chip crisis through the end of 2022 and they expect the chip crisis to last into 2023.

This is a forecast of 15 million fewer cars being built over the next two years at an average selling price of about $30,000. An August 20021 global forecast for light vehicle production in 2021 was 80.78 million units.

The 7-9% shortage of new cars is increasing the price of used cars. Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 3.6% in the first 15 days of September compared to the month of August. This brought the Manheim Used Vehicle Value Index to 201.4, a 24.9% increase from September 2020. The global used car market size was valued at between US$0.9 trillion and US$1.4 trillion in 2020 (range of market studies).

The world has demand for 15-20 million more new cars over the next 3 years that are being met with competition for used cars. Car companies that can overcome the problems to build more new cars will have a large opening to greatly expand production.

Toyota produced 4.5 million cars in the first half of 2021 and sold 5 million. The chip shortage is equivalent to cutting out 70% of Toyota.

Here are some main points to understand the chip shortage:
* It takes years to build entirely new semiconductor fabs
* chips (microcontrollers) that have been used in cars tend to be older and less profitable chips
* chip makers do not want to make more factories for older chips
* chip factories have increased their production capacity by 8 percent since early 2020 and plan to boost it by over 16 percent by the end of 2022
* Ford’s August 2021 car production was down 33% compared to August 2020
* Ford was hit more because of a fire at Renesas Electronics (Japanese chipmaker that is the main supplier of chips to Ford)
* Toyota is cutting car production by 40% in October 2021
* BYD is a Chinese EV that makes its own chips. BYD was going to raise $413 million with an IPO spinoff of its auto chip-making division. This spinoff was halted by Chinese regulators as part of the China Tech crackdown.
* A Ford Focus typically uses roughly 300 chips, whereas one of Ford’s new electric vehicles can have up to 3,000 chips.
* Infineon, NXP, and Renesas were the leading automotive semiconductor manufacturers worldwide in 2020. Infineon’s market share was estimated at around 13.2 percent. The total market in 2020 was sized at around 35 billion U.S. dollars.
* There are five distinct categories of car chips or incorporated circuits (ICs, for example, general and extraordinary reason rationale ICs, microcontrollers, DRAM, simple ICs and blaze.
* Tesla has expanded to dozens of chip suppliers and spends two weeks writing firmware to bring on each new source of chip.

There are typically about $300-1000 worth of chips in every new car.

Global supply chain problems and energy shortages in China are also impacting car makers. Parts suppliers of all types are being forced to have short factory shutdowns. China is short on coal, natural gas and hydro power. Hydro power has been hit by drought and is down 30%.

SOURCES – Seraph Consulting, Manheim, Toyota, Infineon, Renesas, WSJ
Written By Brian Wang, Nextbigfuture.com

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