As projected, the microchip and semiconductor shortage that began mid-2020 as a result of the COVID-19 pandemic, has made its way into yet another year which many of us expected. Globally, the demand for products that require microchips continues to outpace production, causing a ripple effect of delays, cancellations, and a host of other complications.

Within the automotive world, both retail and fleet operations continue to face difficulties. Inflated costs and delays in new vehicle production have pushed fleet operators to extend the life cycle of current assets, despite the potential risks. Meanwhile, car dealerships are experiencing lower inventory levels, often unable to provide customers with the vehicles they’re hoping for.

What is causing the microchip and semiconductor shortage to continue?

Consumer trends are driving an increase in vehicle chip usage. Many have returned to making a daily commute to work, and some have even resumed traveling for leisure purposes. Because of this, more consumers are seeking out personal vehicles in order to avoid public transportation and maintain social distance. Of course, other industries are experiencing the uptick in demand as well. Copious amounts of time at home has caused tech device purchases to skyrocket, from TVs to computers, tablets, webcams, gaming consoles and more.

What efforts have been made to improve the shortage conditions?

The good news is, while the shortage presses on, automotive companies aren’t just sitting by idly. OEMs including Ford, Honda and others, have decided to partner up with semiconductor producers in an effort to streamline chip manufacturing. The goal is to create more chips, reestablish supply-demand balance, and to conduct joint research and development that will help bring new features to the market at a faster pace.

Furthermore, to combat low inventory levels, OEMs are readily offering additional buying options to customers. Now, anyone unable to find what they’re looking for on the car lot has the ability to place a special order among inventory that is still on its way. This solution provides the convenience of shopping online, and allows customers to get ahead of the game so that when the pre-ordered vehicle arrives, it’s already theirs.

As for additional routes to recovery, (as an example) Tesla has found a way to maintain high levels of production amid the shortage. By rewriting vehicle software to support alternative chips, the company has been able to keep up with customer demand.  Others are looking to also think differently to keep up with demand.

On the fleet side of business, diversifying supplier connections, tapping into telematics tools, and risk strategy building are helping organisations to weather the ongoing storm.

How are specific markets handling the chip shortage?

Canada’s sights are set on building chip manufacturing facilities inside the country. In recent months, they formed a national Semiconductor Council that aims to create and execute an action plan to help generate investments, create more internal careers and construct more effective ways to navigate seasons of global hardship. Similarly, the US has shared its own strong desire to lessen dependency on other nations by creating more resources for chip production within the US.

In the UK, where an overwhelming majority of the cars produced are shipped overseas, there’s been a decline in global exports. Despite the dip in overall manufacturing rates, factories have managed to deliver a record number of battery electric, plug-in hybrid, and hybrid electric vehicles over the past year, representing over a quarter of overall car production in the UK. The increase of electric vehicles points towards the continued pursuit of a more sustainable and ultimately zero carbon industry.

Sparking even more hope, there have also been announcements in the UK surrounding auto industry investments. The potential value of 2022 investments are forecasted to reach their highest amount since 2013.

How much longer?

It’s now expected that globally, the chip shortage and delays will last through 2023, however, notable improvements are anticipated to take place by summer 2022. A continued commitment to strategy and innovation could be the key to a brighter future for the industry as a whole.

You have our support

If you need help navigating the current conditions, contact us! At Holman, we’re continually studying the supply chain timeline and working to build resilient solutions to help mitigate risk and keep your fleet moving forward.

Stay in the know with ongoing communications via the Holman website, as well as The Morning Brake e-newsletter.