For automakers worldwide, the chip scarcity continues to be one of the major issues. While some predict that the semiconductor inventory will increase in the second half of the year, others are much more gloomy.
Hyundai, for instance, expresses doubt about the likelihood of a significant recovery this year and says it is “extremely difficult” to forecast when the shortfall may end.
According to Tarun Garg, director of sales, marketing, and service at Hyundai Motor India, the automaker now has 135,000 pending reservations in the country. Naturally, increasing production is a top priority right now, but the chip scarcity prevents automobiles from being manufactured at the necessary rate.
Predicting the end of the chip scarcity is a dangerous guessing game, if we are to believe the chipmakers themselves.
Nobody should hang their breath for the crisis to end, according to Intel, one of the greatest names in this sector. Sadly, the company has a very bleak outlook because it thinks the tight inventory won’t be fully rectified until 2024, at the earliest.
The justification is often sound. While chipmakers are making significant investments to increase their output, and new facilities are expected to open in late 2022 and 2023, they are now facing a serious equipment shortage that is impeding the creation of chips.
According to Intel, it is extremely difficult to build the necessary chip production equipment because of all the issues the globe is facing, including not only the lockdowns that are still in place in some countries, like China, but also the geopolitical concerns in Europe.
In other words, chipmakers lack the equipment necessary to produce semiconductors, and the shortages experienced by their suppliers are causing significant delays in the shipping of essential equipment. Therefore, according to Intel, the chip shortfall would last at least until 2024.
In This Article...
Hyundai Reaffirms That the Chip Shortage Is Still a Nightmare From Which It Cannot Awaken
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.
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.
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.
Due to parts shortages and the COVID outbreak, Hyundai and Kia have more than 1 million vehicles on backorder.
Due to a number of causes, including a lack of semiconductors, the Russian invasion of Ukraine, which created fresh supply issues with wire harnesses, and plant closures in China due to a new COVID-19 epidemic, Hyundai and Kia had amassed a combined backlog of 1 million vehicle orders.
According to The Korea Times, which cites industry officials, Kia and Hyundai had a backorder of just 100,000 cars at the beginning of 2021, but by March 2022, that figure had risen to over 500,000. The brand’s target of selling 7.47 million cars this year will be significantly hampered by the delay. The backorder accounts for 15% of 2021 sales for both Kia and Hyundai, which reached 6.66 million vehicles.
Only 82 percent of Kia’s Korean production was running at full capacity in March, resulting in a 26,000 vehicle shortfall. Semiconductors caused the failure of 19,000 of those vehicles, and a deficiency in wiring harnesses was to blame for the remaining 7,000. Manufacturing failures of 14,000 automobiles were also experienced in American, Mexican, Slovakian, and Indian factories.
In a conference call, Kia said, “The average number of contracts each day is increasing, but backorders are also increasing due to a shortage of production.”
While customers of the Kia Sorento and Sportage Hybrid must wait 18 months to receive their vehicles, those who purchase the Kia Carnival should have to wait eight to eleven months. The K5 is delayed by five to eleven months, the Niro Hybrid by eleven months, the K8 by six to thirteen months, and the Bongo by four to ten months.
Genesis models are also impacted, with GV60 and GV70 purchasers anticipating wait times of more than a year. Buyers of the Ioniq 5 and Porter EV are in the same situation and must wait 12 months for delivery.
An official spokesman added, “Recently, the manufacture of automobiles has been delayed due to the shortage of chips and parts, therefore the number of backorders has increased.”
The year-long worldwide semiconductor shortage is anticipated. According to market research company AutoForecast Solutions, the scarcity has already caused a 1.34 million vehicle production delay worldwide.