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A Global Chip Shortage Is Halting The Car Industry

A Global Chip Shortage Is Halting The Car Industry

The increase in technology in our cars has contributed to a global chip shortage that is affecting automakers across the world. A combination of lower production and higher demand due to coronavirus and increased use of chips in cars has meant some manufacturers having to pause production until they can source more chips.


Increased demand for laptops, phones, games consoles and computer hardware due to the pandemic has driven much of the demand. The increased use of the same types of chips in cars has added fuel to it.


The result is companies like Ford having to pause production in Michigan, Illinois, Ohio, Missouri and Kentucky until it can get more. General Motors and other automakers are all having to look at their production schedules to see whether they will have to do the same.


Semiconductor  Chip Shortage


The chips are technically semiconductors and are used across the world in TVs, phones, games consoles, computer graphics cards and cars.


Automakers use semiconductors in parking sensors, cameras, safety tech, infotainment, autonomous technology, audio systems and even power steering and braking.


The newer the car, the more semiconductors they use!


The pandemic caused many households to invest in electronic devices to help them work from home and entertain themselves through lockdown. Combined with scalpers buying up huge inventories, this has caused a global shortage of semiconductors.


The manufacturing plants themselves have been slowed due to the pandemic and are struggling to catch up. The entire supply chain from raw materials to shipping is feeling the effects.


Just in time manufacturing


The shift towards the cost-efficient just in time manufacturing model has also caused issues. Timelines are tight and even a modest delay within the supply chain can have far-reaching effects.


The pandemic, lockdowns and even the blockage of the Suez Canal can impact global supply chains.


Just in time is very efficient when everything works well and there is tolerance built in for modest delays. Nothing prepared manufacturing for COVID-19 or Suez though. The effects of which we are seeing now.


The result is automakers having to slow or pause manufacturing. Leasing and rental companies running out of cars, higher prices for used cars and longer wait times for new cars to be manufactured.


It isn’t just Ford that’s affected. Nissan, Honda, Volkswagen and other manufacturers have also said production has been compromised by the situation.


Whether this will be enough to force a rethink of just in time manufacturing or not remains to be seen. While Ford has to pause manufacturing its most profitable models, we imagine people within the company are working furiously to come up with alternatives.


In the meantime, if you’re in the market for a new car, we recommend visiting Car Nation Canada quickly before demand completely outstrips supply!


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Categories: Car News