Chip shortage in rearview mirror but car dealers still face other supply chain issues

SEMICONDUCTOR shortages are no longer holding back car production, but automakers are still struggling with fluctuating supply. As a result, control of supply chains – something the China brands have pursued – is turning into a significant advantage.

For most of 2021 and 2022, the global production of cars was hamstrung by a shortage of microchips. One estimate by S&P Global Mobility pegged semiconductor shortages as responsible for the production loss of 9.5 million light vehicles in 2021 and 3.5 million in 2022.

This difficulty appears to have been overcome, with semiconductor-linked production losses falling to an estimated 524,000 in the first half of 2023.

Klaus Maeder, the Bosch Mobility Sector board member responsible for operations, said the semiconductor market had indeed eased for most industries.

Still, he said, the automotive industry continues to struggle because global demand for cars exceeds production capacity. The company is “systematically expanding semiconductor development and production” with its partners and suppliers to improve “global availability”.

Bosch is a major automotive supplier and one of the few that makes its own semiconductors. It is in the process of ramping up its chip production to meet shortages, and recently opened a S$95.2 million chip testing centre in Malaysia.

The recovery in supply is tangible to motor traders such as Wilfrid Foo, the managing director of Direct Motor Interests for Jardine Cycle & Carriage.

“Over the last year, I can tell you that there has been a recovery,” said Foo. In Singapore, Cycle & Carriage is the dealer for the car brands Citroen, DS, Kia, Maxus, Mercedes-Benz, Mitsubishi and Ora.

Foo added, however, that the resolution of one shortage has been followed by others. After the semiconductor shortage, the next major disruption was a shortage of wiring harnesses as a result of the Russia-Ukraine conflict.

Because of their complexity, he said, automotive supply chain issues need more time to stabilise. He believes a full recovery by the end of 2023 is unlikely.

Foo said such issues have influenced the company’s decision-making. It has prioritised larger carmakers with “a good industrial footprint, a proven track record and history”, he told The Business Times (BT) at the showroom opening of its new partner Great Wall Motor on Aug 3.

Echoing Foo’s sentiments, a general manager for a multi-brand car dealership group said business had been affected by various component shortages – ranging from windscreen glass to electric vehicle (EV) batteries.

The situation for car deliveries in Singapore has improved, he said, but fluctuations are still common. Car deliveries have become hard to predict, with a glut one month and a shortage the next.

Amid this uncertainty, several Chinese brands are standing out as being largely free of supply issues.

Checks by BT found that among three Chinese passenger car brands in Singapore – BYD, MG and Ora – there were no reported delays in car deliveries.

MG is thought of as a British brand, but it is Chinese owned. The bulk of its research, development and production takes place in China.

James Ng, the managing director of BYD Singapore, said the company had no trouble fulfilling its orders because of its high level of vertical integration.

Unlike other carmakers, BYD designs and manufactures most of its components. These include the chips it uses as well as all of its EV systems, including control electronics and batteries.

It has its own semiconductor business (BYD Semiconductor) and logistics arm (BYD Logistics), and in 2022 spent US$689 million on its own fleet of car-carrying ships.

BYD is China’s top-selling car brand. The company recently posted its best quarter to date, selling 700,244 passenger cars globally from April to June.

These three Chinese brands are also highly focused on EVs.

An International Energy Agency report showed that EV demand has grown steadily in the past five years, even through the pandemic.

China was an early-starter in the EV game, funnelling billions into its EV industry as early as 2007. It is now the largest EV market and EV producer in the world, and controls the majority of the supply and refinement of lithium and cobalt – both key materials for EVs.

This robust internal supply chain has helped its carmakers charge forward while others grapple with supply issues – a trend that could persist if relations between China and the United States do not improve.