If you’ve followed the news for the most part of the last few years, supply chain problems must be no stranger to you. Virtually all the industries are impacted by supply chain challenges. One of the most heavily affected ones is the auto industry, where vehicles are slower to be made, dealerships have hiked prices, and clients have been taking to the bank and waiting for the vehicles for months and years. And the question arises, why these supply chain problems are appearing? And what do “supply chain” have to do with cars exactly?
In this blog, we’ll piss closely into the root of the supply chain problems in the car industry, their roles in the whole supply chain, and the possible solutions to the existing problems. It is time to find out the secrets and details that are running the show.
- What Is a Supply Chain?
As we would like to stress from the start, in order to comprehend the issues, it is important to outline waht a supply chain simply is. In short, a supply chain is the concatenation that transforms the raw materials into a finished product. This entails the entire process from sourcing the components, through the manufacturing to customer delivery.
The automobile supply chain is so complex that it is confusing. Autos consist of thousands of various components—drives, tires, electronics, and seats—which are manufactured in different places by scores of suppliers worldwide. These components must be put together within the right limits of time and place for the car to be assembled.
One of the complications in this chain is when it is any disrupted such as the production of a small electronic chip or the transportation of raw materials; the whole process will slow down, or it can stop totally. This has been the scene in the auto industry for a little while now, and it has led to most major manufacturers being on crawling mode in the buying and selling of the market products.
- Why Are There Supply Chain Issues in the Auto Industry?
There are the main factors which are the culprits of such an event in the automobile industry. Some elements of those have developed slowly for some time, and the others are the aftermath of more recent activities. The major ones are as follows:
a. The COVID-19 Pandemic
It’s impossible to talk about supply chain issues without mentioning the COVID-19 pandemic. Right after the covid out broke, all the factories and production facilities of the world had to switch themselves to function on a limited scale or to be completely shut down in order to stop transmitting the virus. Consequently, many of the auto parts such as microchips and the materials which are used to make such Level.
The car sales went down suddenly at the same time. People were at home and they weren’t interested in buying a new car boredom. The majority of the car factories were the ones who took the decision to downsize on the parts they had ordered using the rationale that the demand for cars would stay modest for a while.
By the end of the lockdowns, a satisfied bunch of car manufacturers was able to meet the inflating demand related with the increased mobility of their customers as restrictions. People’s intended use of the vehicles was either for road trips or staying away from public transportation. Unfortunately, the suppliers couldn’t provide the necessary parts and raw materials needed to meet the increased demand among other reasons. Therefore, the product backlog heightened which further increased the problem.
b. The Semiconductor Chip Shortage
The deficiency of semiconductor chips in the automotive industry has become one of the major pain points. These minuscule chips are integral to the operation of modern vehicles and control everything ranging from infotainment systems to safety features like airbags and anti-lock brakes.
The pandemic wreaked havoc on the semiconductor industry, causing a huge rift in the manufacture of these chips.
Thousands of factories producing semiconductors stopped or minimized output and automakers reduced their orders, thinking they would need fewer chips in this crisis. Meanwhile, demand for electronic products like laptops, smartphones, and gaming consoles piked, and most of the semiconductor producers switched their outputs to those industries.
Around the time most car factories began to start functioning again, they ran into major problems at the silicon plants which meant they had a severe shortfall of microprocessors. In addition, carmakers still face difficulties in getting the needed chips for their vehicles, and the supply chain constraints are having an immense effect on new vehicle production.
c. Labor Shortages
The machinery that runs the supply chains is in grave danger due to the scarceness of labor, which is the other X-factor. The automotive industry is just one of the many industries that are having a tough time finding the workforce needed for setting-up factories, warehouses, and transportation centers. The
deficit of manpower has been fueled by the still ongoing nCOVID-19incidents. Some workers choose to retire in the middle of the pandemic while others prefer to go to another field or remain at home because of their health concerns. As a result, the workers are
demanded to tighten the belt to keep the production process running and to last the companies’ requirements.
d. Shipping and Transportation Delays
A car is completed but it still needs to be dispatched to the dealerships which will result in the shipping delays. Ports all over the world faced a cargo backlog due to the pandemic, as well as a lack of containers, port workers, and truck drivers. This is to say that cars are sometimes prepared for shipment but stuck in the conveyance process that can take a week or month to pass.
- How Do Supply Chain Issues Impact Consumers?
What, then, do these supply chain issues mean for the average person who wants to buy a car? The situation has become quite complicated, since the automotive industry is afflicted by substantial damage. In the meantime, car manufacturers are struggling with the decline in car sales and rising costs of materials.
a. Longer Wait Times for New Cars
One of the biggest impacts can not be ignored because the longer wait times for new vehicles is simple to notice. Production disruptions and the lack of components such as semiconductor chips are beyond the manufacturer’s control, and as a result, they are struggling to make as many cars as the demand. Thus if you order a new car, you now may need to wait more than six-eight months—or even up to a year—before it’s produced.
b. Higher Prices
Supply chain issues have also been a driving force in the rising prices of both new and used cars. With cars produced in fewer numbers, the customer demand for the remaining cars is increasing, which leads to price increases. For the used cars, the changes are even more striking: in some cases, the price of a car is up to several thousand dollars higher than it was before the pandemic.
c. Limited Options and Features
In the light of the chip crisis, some manufacturers are still omitting certain high-tech features to make sure a maximum amount of vehicles comes out quickly. Let’s say that cars are sold without such features as heated seats or advanced driver assistance.
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