Does Hyundai Have A Chip Shortage?

There is no escaping the chip scarcity, and if anyone still needed more evidence, General Motors’ recent news regarding the Fort Wayne factory serves as a pretty good affirmation.

Due to a shortage of semiconductors, the American automaker is temporarily closing the facility; activities are anticipated to resume later this month.

Similar to General Motors, Hyundai also struggles to manage the disruptions brought on by the chip crisis, and in the end, the monthly sales are the ones who suffer.

Unsurprisingly, the most recent corporate numbers for the month of June show a dip, with Hyundai’s total sales falling 4.5 percent compared to the same period last year. More specifically, Hyundai sold fewer automobiles in June than it did in the same month the year before (356,631 against little over 340,500).

The disparity between the first six months of the two years is considerably more concerning than the drop itself, which may not be all that significant.

Hyundai sold 1.87 million automobiles from January to June of this year, compared to over 2 million over the same period in 2021. In 2022, the gap indicates a decline of 7.6 percent.

The automaker has acknowledged that the chip shortage has a significant influence on its output and sales, and at this point, it’s difficult to predict when the problem will end.

Although no one can say for sure, IT behemoths like Intel don’t think the global stockpile will return to pre-2020 levels before 2024. In other words, the chip shortage is still in its early stages, and automakers worldwide will likely face more challenges for another two years.

However, the majority of businesses anticipate considerable inventory improvements in the second part of this year.

However, not everyone concurs…

Hyundai, a South Korean manufacturer, has caused a stir by asserting that the world chip shortage is about to alleviate, which might spell the end for exorbitant automobile costs. However, not everyone concurs with this evaluation. Even if Hyundai and others are right that the chip scarcity is about to come to an end, other issues might cause car prices to remain high for some time.

Hyundai has been able to enhance output thanks to an increase in the supply of automotive chips. The automaker restarted weekend and overtime work at its South Korean facilities. For the second half of 2022, output will be increased globally, notably in North America, as demand continues to outpace supply. Competitors who haven’t expressed as much enthusiasm about resuming pre-pandemic production levels may be forced to act as a result of such a move.

Volkswagen also anticipates a strong second half of 2022 as the chip supply begins to strengthen. Even now, it is discussing overtaking Tesla in the EV market.

Not everyone agrees on how long the chip scarcity will last, as we’ve previously discussed. Others claim it won’t be done until at least 2024, while some believe it will by the end of this year.

Sadly, a combination of rising lending interest rates and declining customer demand is enabling the auto sector catch up despite a dearth of microprocessor chips. Given that everyone is talking about the recession these days, more people are trying to prolong the life of their present vehicle.

Even if Hyundai is correct that the chip scarcity will end soon, other factors can contribute to low vehicle production. Automakers may not be able to decrease costs as long as dealerships continue to behave more like order centers rather than keeping deep stock on their now-almost-empty lots because raw materials like glass and aluminum are in short supply.

Of course, Hyundai is benefiting from the disparity in prices, as seen by the fact that Q2 2022 saw its biggest quarterly profit in the previous eight years. That was largely caused by the won’s decline in value in comparison to the dollar and other major currencies. Additionally, the fact that there is still a high demand from customers for Hyundai SUVs, which have substantially higher profit margins, didn’t hurt.

Hyundai Might Be Beginning To Reverse The Computer Chip Shortage

After the computer chip shortage hampered sales in August and September, Hyundai intends to have enough computer chips in the fourth quarter to make vehicles and trucks for the U.S. market in accordance with its original business strategy.

The whole auto sector is experiencing a lack of new automobiles and trucks as a result of the chip shortage. This year’s record-high car costs are also being driven by record-high demand.

In a press conference held online on October 13, Hyundai Motor North America’s president and CEO, Jose Munoz, also served as the company’s worldwide COO.

That’s good news for Hyundai and could be a precursor to the car industry as a whole beginning to move over the chip shortage.

According to Bill Rinna, director of Americas Vehicle Forecasts for LMC Automotive, in a separate webinar on October 13, the chip shortage that started in early 2021 has already reduced North American production of the entire sector, not just Hyundai, by around 1.98 million cars and trucks.

What shortage of chips? Hyundai has a strong sales trend.

Everyone in the world was impacted by the pandemic, often in unexpected ways. The auto industry is facing a serious conundrum as a result of one such instance. With the production of vehicles being forced to slow down, automakers are battling to keep up with consumer demand. It has occasionally came to a stop in some instances. A lack of semiconductor chips is to blame. However, despite a recent hot streak in the automaker’s sales, Hyundai appears unaffected.

Making Progress With the Car Chip Shortage

Hyundai hopes to get back on track by the fourth quarter and resume producing cars and trucks for the American market in accordance with its original business strategy. By the next year, Hyundai intends to install the new microchips in its automobiles. Hyundai reported a 56% rise in sales over the prior May at the end of May 2021, breaking all previous sales records. Hyundai is doing very well despite the difficulties when compared to businesses like Ford, whose losses vary between $1 and 2.5 billion.

In its largest market, North America, Hyundai says it anticipates a 20% increase in sales in 2022.

SEOUL — Hyundai Motor Co. of South Korea predicted on Tuesday that after a global chip scarcity began in the second quarter, it will gradually ease in the first half of this year.

According to Executive Vice President Seo Gang Hyun on the conference call for Hyundai, “the normalization of car chip supply and demand is expected in the third quarter, when the capacity of semiconductor businesses is projected to rise.”

According to Seo, the COVID-19 pandemic in Southeast Asia that persisted for a long time and the ensuing problems with chip sourcing caused Hyundai’s sales to fall short of the anticipated 4 million vehicles in 2021. The shortage will continue in the first quarter as a result of the spread of the Omicron variant.

The supply of the fundamental chips that power the world’s automobiles, smartphones, and household appliances is centered in Southeast Asia, with Malaysia’s chip assembly industry accounting for more than a tenth of a global commerce worth more than $200 billion. Since last year, lockdowns due to COVID in the area have hampered a number of companies.

In its largest market, North America, Hyundai says it anticipates a 20% increase in sales in 2022.

The combined global sales of Hyundai and its subsidiary Kia Corp., two of the top 10 automakers in the world by sales, are expected to increase by 12.1% in 2022. Last year, due to semiconductor shortages, their sales fell just under four percent short of their target of 6.92 million vehicles.

Due mostly to the payment of corporation taxes, Hyundai reported a profit decline of close to 50% for the quarter ending in December, considerably falling short of analysts’ expectations.

Compared to 1.1 trillion won a year earlier, it reported a net profit of 547 billion won (US$456 million). That contrasted with the 1.5 trillion won average analyst projection gathered by Refinitiv SmartEstimate.

According to analysts, rising raw material costs, component shortages, and logistical snags brought on by the pandemic are anticipated to push expenses further higher in the current quarter.

According to Lee Jae-il, an analyst at Eugene Investment & Securities, “it is still impossible to anticipate how the chip scarcity will roll out… there will also be additional risks concerning the proliferation of the Omicron variant and potential problems relating to Ukraine tensions.”

Due to an increase in COVID instances and problems with the supply of parts, Japanese automakers Toyota Motor Corp. and Honda Motor Co. have announced that they will reduce their output this month.

Analysts anticipate Hyundai will increase vehicle prices to offset the impact of the ongoing supply chain and distribution issues that are delaying deliveries and production.

Major automakers and dealers have already increased car prices over the past year, including Tesla Inc. and Honda.

Defective computer chips from third parties may be about to cause Hyundai’s manufacturing to be delayed, according to a leaked internal letter.

Hyundai may soon experience interruptions after avoiding the global semiconductor chip scarcity for more than a year.

Hyundai may experience manufacturing delays starting tomorrow, according to a “urgent notice” published on the company’s intranet in South Korea and leaked to the local newspaper ET News.

Defective chips used in satellite navigation systems are believed to be to fault, and the automaker anticipates that new-car production will be affected starting on January 26.

However, Hyundai denied any manufacturing delays in a statement that was translated and provided to the Korean media.

“Production is not being held up by a single semiconductor supply issue for a particular item, despite the seriousness of the semiconductor supply and demand crisis. Overall, semiconductor production, demand, and supply are severely constrained.”

Wheels was informed by a spokeswoman for Hyundai Australia that the local division was not aware of any delays with vehicles with GPS.

The “mass faults” relating to semiconductors utilized in the microcontroller unit for audio, video, and navigation are blamed in the internal warning that was released.

The French-Italian business ST Microelectronics is accused of delivering the defective chips, but the company declined to corroborate the claims.

Hyundai has survived the storm, being one of the few that continued to order the computer chips despite industry-wide problems from the pandemic, despite practically every other major automaker having with difficulties connected to the global semiconductor shortage.

According to a source with connections to Hyundai’s purchasing, the company “like other manufacturers, also intended to curtail production at the beginning of the year because of COVID-19,” according to a Reuters report from February 2021.

But procurement noticed that the semiconductor sector was cutting back on the manufacture of car chips and warned that if we didn’t acquire these as well, we would have problems down the road.

The most recent allegation claims that Hyundai presently has 34,000 Tucson SUV orders with no known delivery date and 44,000 orders for the all-electric Ioniq 5 with projected delivery timeframes of up to 12 months.

Despite billions of dollars being invested in new manufacturing facilities throughout the world, both chip manufacturers and automakers are issuing warnings that the semiconductor shortage will persist into 2023.

Is the chip scarcity affecting Hyundai and Kia?

1,000,000 is a startling figure that highlights the effect of the worldwide chip shortage and other supply chain concerns on the automotive industry. According to a report by The Korea Times, the current backlog of automobiles at Hyundai and Kia is a combined one.

Of course, there are a few additional explanations, such as the Russian invasion of Ukraine and the current plant shutdown in China as a result of a new COVID-19 epidemic.

The backorders account for almost 15% of the 6.66 million vehicles the Korean duo sold globally in 2021 and 13% of its initial 2022 sales forecast.

Due to a shortage of wiring harnesses as well as semiconductors, Kia’s domestic facilities only operated at 82 percent of capacity in the previous month. 40,000 automobiles are currently in the waiting process at Kia factories in the United States, Mexico, Slovakia, and India.

According to the article, delivery periods can be as lengthy as 18 months. The Hyundai IONIQ 5, Kia Sorento Hybrid, Sportage Hybrid, EV6, Genesis GV70 and GV60 are a few of the most affected vehicles. The majority of them are electric cars, whose popularity has increased dramatically recently as a result of sharply rising petrol prices.

According to researchers, the worldwide chip scarcity will likely continue through 2023 and through 2022.

Sales of new vehicles fell by 12.3 percent in Canada and 16.6 percent in the United States during the first quarter of 2022. Additionally, there was a little decline from the last quarter of 2021.