The microchip shortage seems to be reaching a critical phase. As the entire industry waits for the situation to be resolved and many suppliers busily increase production rates to meet automakers' demand, some manufacturers are, right now, having a tougher time meeting production targets.
The two hardest hit U.S. carmakers so far are Ford and Chevrolet.
According to data presented by the BuyShares Group, nearly 370,000 units have had to be removed from production schedules as of May 1. The Ford F-Series pickup truck is the most affected model, with production reduced by nearly 110,000 vehicles.
And what led to this situation? When auto plants in the U.S. and around the world shut down at the onset of the pandemic in the spring of 2020, many automakers made what turned out to be a major mistake: they canceled their orders for microchips, which are critical to the manufacture and operation of new models.
This is understandable in the sense that technology is evolving so rapidly that there is no point in having stocks of chips on hand, as these could quickly become obsolete. However, for a few months, it would have been necessary to keep up the pace.
And chip manufacturers have turned their production to other customers. In some areas, the demand even became higher during the pandemic period, as people confined at home were buying up more chip-equipped devices.
Now, demand for new vehicles has picked up, but the chips, which are vital to everything from the on-board computer to the safety features to the multimedia system, have been in short supply around the world for months, and the problem could take a few years to fully resolve.
Aggravating factors include a fire at an automotive chip factory in Japan, the tightening of supply chains after the Ever Given ship ran aground in the Suez Canal and a shortage of oil for the plastic used in the chips didn't help as the pandemic began to emerge. All have contributed to the headaches suffered by automakers.
When things start to go wrong...
The most affected
A report from AutoForecast Solutions showed that Ford was the hardest hit by the global chip shortage, pulling more than 230,000 vehicles from its production schedule. Chevrolet was the second hardest hit U.S. automaker with a production cut of 140,800 vehicles. Jeep followed with about 138,700 units.
In terms of the most affected models, the Ford F-Series leads the way, with production reduced by 109,710 units. The statistics show that 98,584 Jeep Cherokees that were supposed to be assembled have not been, while production of the Chevrolet Equinox has so far been reduced by 81,833 versions.
The combined market capitalization of the Big Three American car manufacturers has plunged by $18.8 billion (US) in one month.
We will, of course, be watching the situation closely in the coming weeks and months as the automakers need to show resilience to get through this latest difficult situation.