By on January 31, 2022

Chip

It seems this calendar year will improve in terms of supply chain challenges for many auto manufacturers, with a general consensus that new chip sources will alleviate some of last year’s snarls. Still, one forward-looking group of analysts have peered into a crystal ball and determined all hands might not be out of the woods quite yet.

According to eggheads at an outfit called AutoForecast Solutions, roughly 71,000 vehicles have been cut from production at American car factories so far this year. Using calculations and estimates which surely involve some measure of dark magic, the group suggests the country could delete nearly a quarter-million machines from its assembly lines by the time Santa Claus shows up in December.

For perspective, the same analysts reported the American auto industry was off by about 3.4 million cars and trucks in 2021, largely thanks to the global chip shortage. The numbers reported by AFS today are an upward revision compared to estimates made earlier in the year, so please pay no mind to any sensationalist headlines spouting assertations that there will be large increases in production cuts this year. While that statement may be true when comparing these estimates to those of early January, they pale in comparison to what happed in factories across our nation last year.

Production of vehicles in America has hovered around 16 million units since the mid-‘90s according to this chart from Statista, save for a plunge in 2009 when the industry was in dire straits and bankruptcies flew around like rice at a wedding. This same group pegs 2020 production numbers around 13.5 million. Taken with the AFS estimate that the industry bled about 3.4 million units in 2021, that’d put last year’s output just slightly more than the bad-old-days of ’09. Given the dearth of product on some dealer lots, it’s a plausible stat.

Car companies are improving their output compared to 2021 thanks to some creative chip usage (or procurement). Plans are in the works for domestic production of the things, along with new agreements being signed with different chip suppliers. Some companies have taken to deleting certain chip-driven features from their vehicles in order to stretch their existing supply of chips; GM, for example, has binned several items such as parking beepers and active fuel management engine gubbins. Some pickups and SUVs have also lost their temperature setting readouts on dashboard control dials. Other manufacturers are deploying similar tricks.

[Image: General Motors]

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21 Comments on “A Side of Chips: Analysts Worsen Outlook for ’22, Remain Better Than ’21 Levels...”


  • avatar
    CKNSLS Sierra SLT

    Don’t expect any significant discounts from MSRP until 2023-IMHO.

    • 0 avatar
      thegamper

      I wonder if it will be even later than that. I am sure there are a large number of people out there sitting on the sidelines saying no way to dealer markups. There has got to be some pent up demand, perhaps a few million vehicles worth. That could take 2 years to work through the system once supply problems are fixed.

      The good thing is that when supply problems are fixed, we know automakers cant control themselves and will over supply, reduce prices rather than cede market share. Someone will break ranks, probably the domestic manufacturers to feed their bloated legacy costs and the spiral back toward incentives will be on.

    • 0 avatar
      eggsalad

      I don’t expect that significant discounts will EVER return. The industry – both manufacturers and dealers – is currently in the process of training the public to be HAPPY to pay full sticker price (if not significantly above!) Why would they ever go back to giving discounts??

      • 0 avatar
        CKNSLS Sierra SLT

        eggsalad-
        I know for a fact (as stated above by the gamper) that many would like to upgrade their vehicle but will not pay MSRP. So the only way vehicles will sell at MSRP (in a normal market) is that if they represent “a fair value” or every ones ride wears out and they are forced to make a purchase. I expect Ford to run basically a “to order system” (as long as they can) because they have product at the present time you can’t get anywhere else. That is the Maverick and the F150 Lighting. The latter being an electric truck that actually looks like a truck. There is not true competition to the Maverick-despite what websites and car magazines say.

      • 0 avatar
        thegamper

        Oh discounts will return, they cannot stick to “order only” or limit demand for perpetual markups across the industry, that would be price fixing first of all……but the main reason is Ford and GM will not be able to handle it once Ram starts selling pickups at a $4k discount and pulls in some conquests. Or Toyota starts dumping RAV4s to keep the “Best Selling” crown, others will follow to avoid market share loss. It cannot be stopped. Problem is you have to have spare production capacity, which we dont and may not for a while.

        • 0 avatar
          JMII

          “others will follow to avoid market share loss”

          I agree. Once someone can refill their lots that will give them a big advantage on their competition. Prime example: Ford has stopped taking Maverick orders and already people are posting on the Santa Cruz forums talking about buying one instead simply because it was “in stock”.

          The vast majority of people are not good at waiting, so the idea of ordering a car is unacceptable to them. In fact this is why people are paying over MSRP. However over MSRP does nothing for the OEM because that extra cash goes into the dealers pockets only. The OEMs would prefer to crank up the line since volume has always been their business plan as it drives down per unit costs.

          • 0 avatar
            Jeff S

            The only issue with ordering is how long are you willing to wait for your vehicle to be built. Most might be willing to wait 2 to 3 months at most but if you have to wait a year or more then the answer is not many and once the chip shortage subsides there will be less reason to wait more than a couple of months. I prefer to order but if Ford’s long term business plan is to rely on customer orders then they need to get their production times shorter and they need to improve their customer communications keeping their customers informed about when their vehicle will be produced. Stelantis will be the first to up their production of Rams if Ford makes customer ordering their primary business model and Ram will gain a larger market share at the expense of Ford. Ford will change once Ram gains more sales. Hyundai and Kia will start to gain more market share once they start furnishing more of their own chips. Ford and GM have the most to lose with both being more vulnerable.

      • 0 avatar
        joesurfer

        Just wait until interest rates move up and depress sales. You’ll see below msrp for sure.

      • 0 avatar

        “Why would they ever go back to giving discounts??”

        Because Chinese EVs will take over US market and Canada too, and Mexico.

    • 0 avatar
      Dan

      To add to that, Bidenflation is hitting sticker prices as hard as it is everything else. Ford’s usual incremental price hikes were about $400. They started this year off with $1,200. Incentives may not come back at all and they certainly aren’t going to come back faster than top lines are going to go up.

      Trade in values are still stupid, financing is still cheap, and 2023 isn’t going to be 2019 again. Do it now.

  • avatar
    28-Cars-Later

    Wait I thought Brandon was on the case and this was going to be wrapping up by the end of 2021?

  • avatar
    Jeff S

    https://www.youtube.com/watch?v=AzuEq4dMG4M&ab_channel=YourAdvocateAlliance%28YAA%29 This is the best explanation so far for the chip shortage

  • avatar

    All the problems will be resolved right before the midterm elections.

  • avatar
    Lorenzo

    Maybe if automakers limit themselves to the computer chips needed to make the vehicles operate, and cut back on the infotainment, they’ll be able to maintain normal production?

    I realize all those “features” which many people don’t use add to the price and profit margin, but it would seem logical that a 25% reduction in volume would eat heavily into those margins.

    • 0 avatar
      CKNSLS Sierra SLT

      Lorenzo-
      The number option car buyers want are heated seats. Then usually that package contains a heated steering wheel as well. Believe it or not-many buyers will base their buying decision on that Infotainment system with everything else being equal. All require chips. The RAM pickup sales shot up tremendously (out selling Silverados) when their interior was redesigned and contained a very large (in it’s segment) screen.

      So-small screens and the manual transmission are not coming back…..

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