Automakers continue to see chip-supply carnage as vendors talk of sales pain
- Reference: 1643973908
- News link: https://www.theregister.co.uk/2022/02/04/automakers_continue_to_see_chipsupply/
- Source link:
JLR said retail sales fell nearly 38 per cent on a year earlier, although revenue was up by 22 per cent to £4.7bn.
The company said passenger car production in most markets had been hit by the continuing supply shortage of semiconductors. The shortages were likely to continue throughout 2022, it added.
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"Whilst semiconductor supplies have continued to constrain sales this quarter, we continue to see very strong demand for our products underlining the desirability of our vehicles," JLR's chief executive Thierry Bolloré said in a [2]statement .
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It's a problem the carmaker had been trying to avoid. In an [5]interview with The Register last year, head of data and analytics Harry Powell described how his team had employed graph databases from TigerGraph to help understand supply chain challenges, including the chip shortage dogging the whole industry (see below).
JLR head of analytics moves on after supply chain project
Jaguar Land Rover built up an analytics system to help predict and mitigate semi-conductor shortages in the auto industry last year.
As the pandemic hit worldwide chip supply, head of data and analytics Harry Powell told The Register how the system built around TigerGraph's graph database system was being used to help forecast the scarcity of parts, including semiconductors.
"One of the things we've been able to do is identify common tier-one suppliers, where we don't know much about tier two. We can identify where to put our effort into working out where our exposure is. By laying it out like that it has become clear to people that we simply don't have depth information that we should have going deep into supply chains and that's going to become more and more important," he said in April last year.
In January 2022, Powell was appointed head of industry solutions at TigerGraph. "Harry brings a wealth of experience in the application of graph technology to data analytics in manufacturing and banking, two strategic areas of growth for TigerGraph," said COO Todd Blaschka.
Powell has since moved on to be head of industry solutions at TigerGraph. There could be many reasons why JLR continued to struggle with a chip shortage and maybe it would have been worse without the efforts of the analytics team.
For sure, a string of other automakers continue to be hit by the problem. Earlier this week, [6]General Motors said its annual revenues of $123bn were down 11 per cent year on year, as the pandemic and chip shortages continued to bite.
Chairman and CEO Mary Barra told an investor call that problems were ongoing, but lessening.
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"We're definitely seeing improvement in the first quarter over the fourth quarter. We saw the fourth quarter better than the third quarter. We really see with the plans we have in place now, we're going to be really starting to see the semiconductor constraints diminish," she said.
Car buyers paying over sticker price for new cars
[8]In the US , new and used car prices are continuing to be pushed higher as the waiting list grows against a backdrop of tight inventory. While the slowdown in manufacturing caused by the chip supply crunch eased somewhat at the beginning of the year, there won’t be a return to normal anytime soon for car buyers. "This pent-up demand will keep inventories low and prices high throughout most of 2022," Tyson Jominy, head of data and analytics for JD Power, told CNBC this week.
According to analysts who spoke to the US news outlet, the average transaction price is nearly half a grand higher that the MSRP: $45,872 vs $45,209, with nearly 90 per cent of punters paying over sticker price.
Announcing results last week, [9]Volvo said it saw sales fall by 20 per cent amid the chip shortage.
Speaking to investors, Martin Lundstedt, CEO, said: "The fourth quarter was yet another quarter characterised by the shortages of material, mainly related to semiconductors and also then the lack of capacity, including freight."
Industry newcomer Tesla was also affected by the chip shortage, although self-proclaimed rock-star tech leader Elon Musk said the effect was declining.
"We still expect to be part or primarily chip-limited this year and that chip limitation should alleviate next year," he told [10]investors .
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Musk said the company had spent some time re-engineering its vehicles to help mitigate the problem including rewriting code, changing chips designs and reducing the number of chips required for each vehicle.
"It's hard to predict 2022 because we still have lingering supply chain issues, globally. But I think at least the chip side of things appears to look like it will alleviate end of this year or 2023. I mean, there are a crazy number of chip fabs being built, which is great," Musk said.
Nissan too [12]has seen sales volume lower than expected mainly due to the impact of the semiconductor supply shortage.
But not all automakers appear to have been hit as hard as JLR, GM, Volvo, Tesla and Nissan were.
Toyota has fared better, although it has not avoided problems all together. It saw a 48 per cent increase in operating profit on flat sales, largely side-stepping the chip crisis. CFO Kenta Kon said improved inventory management had contributed to the results.
[13]Why is the little guy getting rinsed for hardware? Because top OEMs had to spend 25% more on chips in 2021
[14]You're fabbing it wrong: Chip shortages due to lack of investment in the right factories, says IDC
[15]Now that's wafer thin: Some manufacturers had less than five days of chip supplies, says Uncle Sam
[16]Rocketing chip sales growth to ease off this year, reach $680bn, say analysts
In April last year, Toyota president Akio Toyoda told the Japan Automobile Manufacturers Association said, "very close communication between automakers, chipmakers, and the part suppliers that rely on those chips" had proved important.
Meanwhile bolstered inventories and improved supply chain control had put it in a better position than competing automakers, [17]according to Bloomberg .
The newswire quoted Nakanishi Research Institute head Takaki Nakanishi describing how the Japanese auto-giant carefully manages its supply chains to help avoid pandemic-related disruptions.
Ths hails back to lessons learned from the 2011 tsunami which hit Japan causing large-scale industrial damage, including nuclear facilities. [18]Semi-conductor supplies were also hit .
It even caused Honda to halt production on the other side of the world, [19]shutting down car production in Swindon in the UK as it grappled with supply shortages.
In the intervening decade, Toyota came up with a list of about 1,500 parts to stockpile or source alternatives for. It also executed a plan to monitor the vast network of suppliers that produce those items and develop an early-warning system for shortages.
But it is not like the warnings were not there. A [20]paper [PDF] from Imperial College London recommended manufacturers to "look deep within your supply chain. Tier 1 is not enough."
It might be an interesting thought experiment to forecast who, 10 years from now, will have learned the supply chain lessons from the pandemic. ®
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[2] https://www.jaguarlandrover.com/news/2022/01/third-quarter-ebit-and-cashflow-turn-positive-despite-semicondutor-supply-constraints
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[5] https://www.theregister.com/2021/05/10/jaguar_land_rover_tigergraph/
[6] https://www.fool.com/earnings/call-transcripts/2022/02/02/general-motors-gm-q4-2021-earnings-call-transcript/
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[8] https://abcnews.go.com/Business/control-buyers-paying-thousands-sticker-price-cars/story?id=82489039
[9] https://investors.volvocars.com/en/financial-information/results-centre
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[12] https://global.nissannews.com/en/releases/release-19ece0b4021c4f39a563d40ffa45458b-211109-02-e
[13] https://www.theregister.com/2022/02/01/oem_chip_costs_gartner/
[14] https://www.theregister.com/2022/01/28/idc_chip_shortages/
[15] https://www.theregister.com/2022/01/25/doc_chip_shortages/
[16] https://www.theregister.com/2022/01/10/chip_growth_this_year/
[17] https://www.bloomberg.com/news/articles/2021-04-07/how-toyota-s-supply-chain-helped-it-weather-the-chip-shortage
[18] https://www.theregister.com/2011/06/22/gartner_supply_chain_warning/
[19] https://www.theguardian.com/business/2011/apr/06/honda-halves-uk-car-production
[20] https://www.imperial.ac.uk/media/imperial-college/research-centres-and-groups/centre-for-transport-studies/seminars/2011/The-Japan-Disaster-What-Lessons-Learned-for-the-Supply-Chain.pdf
[21] https://whitepapers.theregister.com/
" Jaguar Land Rover, the custodian of those iconic British car brands owned by India's Tata Motors, this week announced lost £9m in the final quarter of 2021 in part down to the global semiconductor shortage which followed the start of the COVID-19 pandemic. "
Of course the loss is down to chip shortages.
It has absolutely nothing to do with:
- poor build quality
- poor quality control
- poor management of line staff building the cars
- poor design of the components used
- poor direction from management staff
I've been behind a chap at the petrol station in his brand new Range Rover - 20 miles on the clock, just picked up from the dealership - with diesel gushing out of the underside of the vehicle as he's filling it up. Why? The car is saying it's out of diesel, yet they hadn't bothered to connect the fuel tank properly.
A friend of mine works on the line for JLR, and he's 5ft 9. He's tasked with fitting a specific part on to a Range Rover (not the fuel tank I might add!), and he can't reach it. He has to strain and contort his body in order to fit it, resulting in hurting his back which then results in him going on sick for 2 months. When he returns, even after the obligatory health and safety check with occupational health, they stick him back on the same job - even though they have noted and said that he's physically unsuited to the job. A week later his back is gone again, and he's off for 2 months.
Every car JLR build goes on a run. Specific employees get the keys to these cars and take them for a mixed run. Slow speeds, then fast speeds on various roads around the factory. It's been known that these idiots thrash the cars in to hedges etc, scuffing/scraping the paint along the sides of the cars. Instead of owning up to it, they park the cars in a part of the car park next to skips, so that they can say they didn't damage the car but loading of the skips did.
I could go on, but it's ridiculous really for JLR to point their loses on chip shortages when they have far more endemic, entrenched issues at hand that they're not addressing.
But they are merely demonstrating the good UK traditions of quality at all stages, that has lead British Leyland to be the world beater that it is!
Now now- the best built car I’ve had was a Honda Accord 1994 (same as Rover 600). When I sold it with 340000 on the clock the ice scraper was still the only thing that rattled
This of course is the same JLR who didn't notice someone stealing a fully loaded trailer of engines...
"Half a grand higher"
Sales down because buyers are paying "half a grand" over retail?
Hah!
Sales are down because there are dealers asking thousands over retail. 2 days ago I happen to look at the listings for the new Ford Maverick, and one dealer was asking $44,000 for one, for a Lariat version that lists at $28,360 MSRP plus options (and you can't pad the bill that far because the Lariat is already the top model with most of the extras built-in).
Where did they get those fantasy numbers??
A friend of mine very recently sold his Range Rover as it was getting very close to the end of the original warranty plus his car requirements had changed a bit. After shopping around to see who would cough up the most it turned out to be a JLR dealer. It was in pretty good condition, not silly mileage and had a full dealer service history. So I'm sure with a quick clean etc then they'll be able to shift it whist waiting for some new vehicles to trickle out of the factory.
a 48 per cent increase in operating profit on flat sales
That's interesting. Sounds like the gas industry. Demand is up so prices hike while costs remain the same and the owners/shareholders make out liker bandits.
Two Volvos, with different CEOs
"Announcing results last week, Volvo said it saw sales fall by 20 per cent amid the chip shortage.
Speaking to investors, Martin Lundstedt, CEO, said: "The fourth quarter was yet another quarter characterised by the shortages of material, mainly related to semiconductors and also then the lack of capacity, including freight."
The link in the first sentence refers to Volvo Cars, but Martin Lundstedt is CEO of Volvo Group, i.e. trucks, buses.