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Small chip causing big problems oPeniazoch – oPeniazoch.sk

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Chips are the brain of vehicles and there are simply not enough of them at the moment. Their lack limits the production capacity of cars, increases prices and in some cases makes it almost impossible to find the ideal vehicle at the dealer. “The main effect is high, really high prices and low supply,” says Michelle Krebs, executive analyst at Cox Automotive, a global automotive services and software company. Due to the lack of chips and the global slowdown in production, the challenges of buying cars are so great that Krebs says she has heard of people willing to fly to places hundreds of miles away just to get to a new car. According to experts, the problem with chips cannot be expected to alleviate so soon. Toyota, the world’s largest carmaker, said its global production fell by 40 percent in the fall of 2021 and has not yet fully recovered. Honda has reduced production by about 30 percent during that time. Production at Volkswagen, the largest carmaker in Europe, fell by almost 35 percent. “Most cars claim that it should improve by the second half of this year, but the supply of chips for cars will not return to normal by 2023 and possibly by 2024,” says Krebs. Today we can no longer produce modern cars without semiconductors, lots of chips. . When our vehicles were transformed into technologically equipped mobile offices or concert halls, they suddenly became incredibly complex. The chips inform the engine how much fuel and air to mix for maximum performance and efficiency. They provide processing for our navigation and entertainment systems. They even help warm our seats to the right temperature. Ten years ago, a Volkswagen vehicle had several hundred chips. Today, there may be more than 5,000. These tiny microprocessors are like the ones that control our electronics, from iPhones and 4K TVs to home printers and game consoles. Although chips are complex in design, they have a relatively simple task: they act as electronic switches that create and interfere with current paths. This flow of power on and off allows the chips to process inputs and store information, controlling the thousands of complex actions we require of our vehicles while driving. Despite the size and revenue of the world’s largest car brands (Toyota has earned about $ 280 billion in the last fiscal year), car sales accounted for only a small portion of the pre-coronavirus chip business. Exponentially more iPhones than SUVs are sold each year, despite the chip-intensive design of these vehicles. When the global pandemic hit the economy, car factories, car component suppliers and car dealers closed or significantly reduced their production. According to the International Motor Vehicle Manufacturers Organization, global car production fell by an incredible 16 percent in 2020. Automotive executives believed they were about to enter a global recession and sought to mitigate the projected surplus of unsold stocks. They also reduced production and canceled orders for parts, including computer chips. And when businesses reopened in the spring and summer, car dealers cut prices and offered significant incentives for new vehicles in the hopes of moving cars out of stores quickly. What followed surprised everyone. People who postponed buying a new car took advantage of these offers. According to Cars.com, more than 50 percent of buyers bought a car sooner than they expected in the first year of the pandemic. Even those who remained in the cities increasingly preferred passenger cars to public transportation or car sharing. The coronavirus has reduced the use of public transport to travel for work. Hoping to increase production to meet demand, carmakers have tried to renew orders for parts. But chip makers facing their factory closures had smaller stocks. Once work could continue, the semiconductor needs of other industries took precedence over the automotive sector. “Mostly it was electronics manufacturers trying to keep up with the increased demand for laptops, phones and video games, as all the people worked, studied and had fun from home,” says Krebs. to their own problems, as, inter alia, port workers in the global shipping industry have remained quarantined or fired. The ports were clogged with ships with chips. Car manufacturers are stuck in the fiasco of the supply chain. It is rare for the whole industry to be recalculated enough. In the world of motorsport, it would be similar to running out of fuel in the last lap of a race, or if an F1 driver arrived in the pits and his crew sat without new tires ready. The carmakers tried to increase production and sell more cars to eager buyers. Some car manufacturers, such as Tesla, have rewritten the code on their available chip stocks, making them usable for new car production. Others, such as GM, have decided to remove some chip-dependent features, such as heated seats, from new vehicles to better distribute a limited number of chips. Ford has taken a more aggressive approach to its most popular vehicles. Instead of waiting for new chips to be delivered, he reportedly continued to manufacture his best-selling vehicle in the United States, but without the chips needed to operate them. They remained in the warehouse, waiting for chips to be available. “Car manufacturers put their chips in vehicles that have high demand, low stocks and high profits,” says Krebs. High demand combined with automakers, which favor the production of more expensive models, helped increase the average price of a new car by 13 percent compared to two years ago. Independent dealers, who feel a tense market and are trying to compensate for part of their losses, attribute surcharges to popular and desired vehicles. These surcharges are often referred to as “market adjustment fees”. Brands like Ford have offered incentives for buyers to buy custom vehicle models in advance, while customers who book a deposited car and are willing to wait several months for delivery will be discounted $ 1,000 or more. Customers looking for new electric vehicles can have the hardest time. These vehicles require as many, if not more, chips than traditional cars and, thanks to battery technology, are more expensive than their internal combustion engine counterparts. And with rising fuel prices and wider acceptance of battery power, demand for EVs is growing even in times of chip shortages. But even if the chip shortage ends one day, some of its effects are likely to persist. “Automakers have realized that keeping production slightly lower than demand is highly profitable,” Krebsová concludes.

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