In recent years, the process of car manufacturing has changed quite drastically. You may have noticed the prices of cars (both new and used) has shot up and wait times for new vehicles are getting longer and longer.
Why?
You guessed it. COVID.
So, how did things work pre-covid?
If we’re looking at the very beginning of car manufacturing, we have to journey back quite a way. Following the development of the gasoline engine in the 1860s, France and Germany took the lead in terms of automotive manufacturing. Some 40 years later, British, Italian, and American manufacturers hopped onboard and began producing vehicles too.
Fast forward a few years, and the world saw a revolution in production. Henry Ford developed an assembly line method that changed the way cars were manufactured, meaning mass production on a large scale was now possible.
Of course, Ford’s methods were replicated the world over meaning other large manufacturers were now able to produce high volumes of cars. Sadly, this meant the end for most smaller competitors who didn’t have the money to invest in factories and other associated costs of assembly line production.
Let’s fast forward again to just a few years ago, before the world had ever heard of COVID. Before the pandemic hit, there was actually an oversupply of vehicles as it worked out as far cheaper to manufacture 24/7, even if the demand wasn’t there. Manufacturers would then sell their surplus vehicles on to larger rental and hire companies. COVID, however, changed everything.
COVID’s effect on Production
An article by Deloitte outlines some of the issues faced by the industry during and following the pandemic. “Symptoms include a disruption in Chinese parts exports, large scale manufacturing interruptions across Europe, and the closure of assembly plants in the United States.” Another huge issue the industry is facing is a lack of semiconductor chips which are vital to car production.
Why the Shortage in Semiconductor Chips?
Many semiconductor plants closed during COVID, meaning far fewer chips were available. Car companies were also cancelling contracts based on decreased production, while at the same time, computer and console companies saw a rise in sales due to more people working from home and gamers looking to update their current consoles to bigger and better models. These companies therefore took over the contracts that once belonged to vehicle manufacturers, and once the world got moving again, it became almost impossible to produce new cars.
What is the State of Play Now?
We are still seeing a shortfall in semiconductor chips. Some experts predict that this will begin to ease in the next 6 months, however Deloitte predicts that things will take a little longer. “The world is hungry for products enhanced by a growing volume of chips, but they’ll be kept waiting throughout 2022 until supply catches up with rising demand, especially for chips made locally.”
With differing opinions how long the chip shortage will really last, there’s no clear answer as to when the auto industry will go back to pre-covid times, or if things ever go back to how they were prior to the pandemic, but we should so a vast improvement and higher levels of production towards the end of 2022 and into 2023.
