Motor Mouth: Why a chip shortage is rocking the automotive world
Sales are plummeting and consumers are pissed — how a few (billion) transistors are holding the entire auto industry hostage
Peugeot recently downgraded some its cars’ Fancy Dan digital instrument gauge sets to retro-tech analog speedometers. BMW has had to ship some of its new cars and SUVs without the touchscreens that are now part and parcel of every luxury sedan’s infotainment system. Perhaps less dramatic, but assuredly more costly, General Motors is delivering some of its big V8s without the cylinder de-activation systems that are touted to reduce their gas consumption.
Cars, in case you haven’t noticed, are are in short supply, Statistics Canada telling us just last week that auto sales fell some 35.6 per cent in September — not because consumers didn’t want to buy them, but because dealers had no cars to sell. According to CNBC, 7.7 million units of production worldwide will be lost in 2021 alone , costing the global auto industry an incredible US$210 billion. However, with more customers chasing fewer cars, J.D. Power recorded the biggest year-over-year increase in per-car spending, with September’s US$42,802 average transaction price a whopping US$12,000 higher than the same month a year’s previous.
Those might be American numbers, but anyone expecting Canada’s traditional incentive-laden December — as automakers look to fire-sale out old inventory before the new 2022s arrive — is probably going to be very disappointed. Hell, try getting a deal even on a used car these days. For the first time in my career in this industry, we’re living in a seller’s market.
As we can all probably recite by rote now, it’s all because there’s a computer chip supply chain problem. But what are these chipsets used for? Why are they in such short supply? And, of course, the biggest question of all, when can we expect this paucity of computing power to be over so we can all go back to the long-held traditional of putting the thumb-screws to our local car salesperson? Motor Mouth did some digging and the answers are, unsurprisingly, not nearly as simple as we’ve been lead to believe.
The average Joe — or at least this average Joe — hears about a computer chip shortage and imagines that we’re talking about some incredibly complicated, absolutely indispensable microprocessor that actually prevents the car from being driven, or at least compromises some key safety device.
In fact, the far bigger issue is the common everyday basic microcontroller — literally costing just a few dollars, or even cents, on an economies-of-scale basis — rather than the superchips that power our fuel-injection ECUs and the controllers that make anti-lock brakes safer. The power-integrated circuits required to allow a seat heater its multiple-setting variability and the sensors that allow a GM small-block to stop firing the number-seven spark plug to save a few wisps of fossil fuels may be the very simplest expression of the modern micro-transistor, but there are literally hundreds of them in virtually any car — luxury or mainstream — and the loss of even a few places a huge — and completely unheard of before today — strain on the auto manufacturing process.
Well, the canned answer is that, back in early 2020, the auto industry predicted (totally understandably at the time) that the COVID-19 crisis would have a more lasting effect on the economy, and therefore downgraded its long-term production plans. The unexpectedly quick rebound in consumer confidence and the resulting demand caught automakers — and their suppliers — off guard. They’ve been playing catch up ever since. That’s the story line at least.
However, while there may be truth to that explanation, the issue is actually far more complicated and, therefore, less easily resolved. First off, the huge ramp-up in cloud computing, 5G networks, and other chip-based computer staples outside of the auto industry would have put a huge squeeze on microchip supply even without the coronavirus crisis. According to Wired , demand for microchips in the market at large went up an incredible 29.7 per cent in the 12 months between August 2020 and August 2021, despite the shortage-inspired decline in auto production. Indeed, as the magazine points out, the cell phone business alone dwarves the auto industry, and its need for advanced circuitry is nothing short of rapacious.