By on February 22, 2021

While the global semiconductor shortage is often reported as this out-of-nowhere surprise that has totally rattled smartphone and automotive manufacturers, 2020 was rich with signals that trouble was afoot. Global lockdowns forced factories to shut down, creating a lapse in demand in damn-near everything. By the time lines started firing back up, supply chains had become a disorganized mess. Nobody knew quite where to focus their efforts. But it was clear that everyone was going to be spending a lot more time indoors, resulting in an elevated need for the sort of components that go into mobile devices, television sets, personal computers, and other electronic gizmos.

Automobiles saw demand suppressed by around 15 percent (year-over-year) in 2020. However, the year ended with increased demand the industry figured would carry over into 2021. That, in conjunction with vehicles needing more semiconductor chips than ever to make sure they’re equipped with the latest features and perpetually connected to the internet, has automakers sweating. Practically every name in the industry has announced production shortfalls. But just exactly how many vehicles are we expected to lose from this?

Roughly 705,000 (globally) according to an AutoForecast Solutions study shared by Automotive News, though the projected losses are much higher at 1.4 million. While we think the semiconductor shortage makes a convenient excuse for manufacturers who might not have rebounded from last year’s disaster, the shortage remains a palpable issue.

Half a dozen factories in North America have already announced extended closures until the chip supply normalizes, leaving the region with automakers claiming a 239,000 vehicle deficit that AutoForecast thinks could end up as high as 402,000. European shortfalls are nearly as bad, with estimated losses eclipsing North America at 520,000 units.

As the global hub of semiconductor suppliers, Asia is assumed to see fewer problems. Chinese facilities are expecting to build 128,000 fewer vehicles than anticipated with the rest of the continent performing slightly better. Still, AutoForecast thinks the region could lose as many as 439,000 planned units.

Sadly, we don’t see this issue being totally resolved as supply chains improve. Chip demand is unlikely to go back down unless automakers become suddenly disinterested in having their products digitized (fat chance) and national security issues are starting to become a problem. China has been hungrily eyeing Taiwan forever and is starting to signal that it might make a move. While the big issue is the political fallout and probable war, Taiwan is one of the largest chip suppliers for our market. But even if things fail to reach that point, most are under the assumption that chip shortages will persist until local markets fulfill their own needs and are anticipating higher prices regardless.

[Image: General Motors]

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27 Comments on “How Many Vehicles Will the Chip Shortage Really Cost Us?...”

  • avatar
    Rick T.

    I really don’t understand your use of “losses” in this context. Are those potential auto sales lost for good or just deferred until some time in the future?

    • 0 avatar

      I think the implication is that it is lost production capacity this year. That doesn’t necessarily mean lost sales though, since it is still really hard to predict what demand will look like this year.

      While we have seen an uptick in sales for some models and segments recently there are a lot of people with a lot of vehicles that haven’t racked up many miles in the last year. I can see lots of people buying out their existing lease instead of returning for a new lease. The fact that they left thousands of miles unused will make a buyout a bargain in today’s market, and since they haven’t been driving it as much they might not yet be bored with it. My “daily driver” sat unused more days than not over the last year to the tune of 10k less than the prior year.

      So I see 3 main factors driving demand over the next year.

      Pent up demand, from all those sales that didn’t happen in 2020

      People who have driven significantly less and in many cases don’t see it going back up.

      Those that have money burning a hole in their pocket because they haven’t lost income but did see their spending drop significantly when they stopped spending money on going out, going to the gym, and visiting the gas pump less.

      So the big questions are how much pent up demand remains and the ratio of the number of people who feel they don’t need a new car since they are driving less to the number of people who have money they really want to spend.

      The housing market says that a lot of people are spending that extra money on houses but that in turn drives new construction which drives pickup sales.

    • 0 avatar

      We can’t go back in time.

      The cars (or any mass-produced product) that you don’t make today, well if you are an efficient automaker that runs your plants 16-24 hours a day, 5-6 days a week, well, the production you lost today, unless it’s a slow seller, it is next to impossible to make up. So the variable profit from that unit–gone (typically, every car built for sale in the US is a “sold” unit—that’s why the window stickers have the dealers name. So you are losing sold units)

      Today’s automakers just can’t ‘turn a knob’ to increase their production rates (unless the vehicle was a slow seller). Their rates were optimized when they launched whatever they are making, and the robots can only run so fast (if you have room, you can add people. Robots are much harder to add…) Slow selling cars mean lower production rates, or fewer production weeks.

      Also, let’s say they can make up the volume in the future–what if demand in the future isn’t there? What if in two months, interest rates double? There go your pretty leases. There goes your demand.

      Right now, trucks are HOT–and they are Detroit’s most profitable products. So they will close those plants last, of course. But Escapes and Equinoxes make money too–just not as much.

      This is a big deal.

  • avatar

    Why wasn’t there a “chip shortage” in Q3 last year?

  • avatar

    Lean manufacturing:

    Great for efficiency.

    Not so great for resilience.

    • 0 avatar


      “Not so great for resilience.”

      Yeah, I always thought that was a potential flaw in the “lean” manufacturing approach. I know the bean counters can prove that JIT is the way to go:-) But, the reality of it is hiccups happen. This one here is a major hiccup.

    • 0 avatar

      JIT–great for efficiency, yes!

      But to facilitate JIT, some one lower in the food chain, has to stock or make extra components, to make sure that JIT works higher in the food chain, since JIT means no extra parts.

      So, a major (never mentioned) aspect of JIT is for the automakers, to push the big suppliers like Bosch, Denso, Delphi (who charge a lot now and aren’t easily pushed), to bully the little fish, who have less pricing power, into holding the extra stock to ensure that there are never any shortages. They ‘eat it’.

      Just outsource the hassle.

  • avatar
    Mike Beranek

    Last year, I was checking out my buddy’s ’65 Skylark, and the lack of electrical wiring was glaring.
    His car has a very simple electrical system: lights, turn signals, heater fan, wipers, horn, ignition coil, alternator, starter.
    And that’s it, nothing else needs wires. For example, there are no wires whatsoever leading from the body into the doors.
    How many wires does a modern car have- just going into the driver’s door?!?

    • 0 avatar

      There’s infotainment stuff in our 8-year-old Focus that we have never learned to use because we have no use for it. If you listen to my wife, air conditioning was the last and final step in perfecting the automotive user interface. (I’d include cruise control which she prefers not to use.) Everything since then has made the useful features more complicated to use or added features that are irrelevant to the task.

    • 0 avatar

      “How many wires does a modern car have- just going into the driver’s door?!?”

      Actually, with a state-of-the-art system, you could get away with just a single positive voltage wire. Wireless. You could even eliminate that one wire with a battery inside the door and an inductive charger in the door sill. The communications can be secured as well to keep it safe. You could even use blockchain within the vehicle to secure it further.

    • 0 avatar
      Art Vandelay

      The 8 series BMW back in the 90s was the first car to implement the CAN bus. I read an article some time ago where the engineers discussed how many more wires it would have taken to get the window to drop when the door opens and closes versus the new architecture. Modern vehicle busses are a result of the money they were spending on copper alone for the wiring harnesses in those old cars. Sure, some basic cars had simple harnesses, but there were also cars like the 68 Continental Convertible. And that is dwarfed by the features in cars today…yet the wiring remains relatively simple and lightweight.

    • 0 avatar

      With CAN it is often down to 4 or 5. There will be a module that needs a decent gauge power and ground wire and the 2 smaller bus wires. The 5th one is sometimes for the lighting. The master switch panel, window, door lock and mirror motors all connect to that module. The signal for the other mirror, windows and locks goes out over the bus to be read by the module in the other door.

      While that cuts down on a lot of large gauge wires, it does mean that there are a lot of modules distributed throughout the car. My MKZ Hybrid shows 40 different modules you can get codes or data from. That is a lot of chips, though to be fair there is a good range of power and capability. The chips in something like a door module of course are not as powerful as ones used in something the engine or ABS/stability control.

  • avatar
    Add Lightness

    I clearly remember the days when you could run a car with 4′ of wire.
    No lights, radio, fan etc. and you had to bump start it, but the car would run and drive, which I have done.

  • avatar

    This should make used car prices go up right? Not enough of a selection of what people want, plus how many really need a new car when they are driving a whole lot less and not going on long trips/vacations. I’m losing my lease miles on my 2020 Equinox, only have 7K miles when I should have 13K plus, someone is going to get a very low mileage SUV when I turn it in ( 30k mile lease) probably won’t reach 20k!

    • 0 avatar

      Just turned in my ‘18 Escalade with 18k miles showing, on a 3yr/36k mile lease.

      Due to my expert care, and low miles, dealer purchased it and quickly resold to a couple looking to replace their “old” ‘03 DeVille. I considered purchasing myself, but GM Financial wouldn’t budge on the contract price and I really want the new Escalade with Super Cruise.

  • avatar

    It is time for Uncle J to send air carriers to South Chia sea.

  • avatar
    Jeff S

    Used vehicle prices will go up with less new vehicles available, less vehicles traded in because of lower miles driven during the pandemic, and more people buying vehicles instead of riding mass transit. As for more wires on today’s vehicles versus 40 or 50 years that is true but even if the manufacturers eliminated many of the wires they would be replaced with wireless technology which requires more chips and thus a larger shortage in chips.

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