Despite manufacturers still managing to turn a profit, the automotive sector hasn’t been in the best of health these last few years. Growth appears to have plateaued in most Western nations, encouraging companies to cater this business toward other markets, supply chains have also been negatively impacted by the pandemic — with semiconductor shortages hindering production schedules on a scale we’ve not seen since the Great Recession.
It’s a bad situation and rumored to get worse if the warning cries of economists are to be believed. But there’s also mounting evidence to support their claims. The Society of Motor Manufacturers and Traders (SMMT) recently reported that vehicle registrations in the United Kingdom fell by roughly 35 percent in September vs the same timeframe in 2020. This is relevant because the month typically represents the second-busiest period for the country and numbers were already low due to production stops created by coronavirus lockdowns.
Stacked against the region’s 10-year average, UK September sales are actually down by almost 45 percent.
“This is a desperately disappointing September and further evidence of the ongoing impact of the Covid pandemic on the sector. Despite strong demand for new vehicles over the summer, three successive months have been hit by stalled supply due to reduced semiconductor availability, especially from Asia,” Mike Hawes, SMMT chief executive, told the Financial Times this week.
From FT:
Dealers reported 215,312 new vehicles registrations last month, 34 per cent down on September last year — when sales were also hit hard by the coronavirus lockdown — and an almost 45 per drop on the pre-pandemic 10-year average. The sales figure is the lowest since the “two-plate” system was introduced in 1999.
Like other sectors, the auto industry, which was already faced with uncertainty around Brexit, was hit hard by pandemic shutdowns and economic uncertainty.
It has continued to struggle to meet pent-up demand as the economy reopened due to a global shortage of computer chips.
Just about everyone expected September to be a sigh of relief for the industry and proof that car sales were rebounding. But automakers have spent the last couple of months reporting significant sales declines and attempting to be careful where they place the blame. Consumers are allegedly not the problem and have even shown a willingness to pay exorbitant prices for both new and used automobiles.
The industry has instead continued blaming the semiconductor shortage while suggesting buyers are eager to jump into the pool with more savings at the ready than usual. Though when your clientele is flush with cash and still not buying, the finger has to be pointed back at the manufacturer or a hectic, uncertain economy. At least that seems to be the case in the United Kingdom and almost assuredly an explanation that carries over for North America.
But the longer this drags on, the more it appears to be a universal issue.
“After a strong spring selling season, the supply situation has worsened precipitously and is dragging sales down with it,” Cox Automotive Senior Economist Charlie Chesbrough stated on Monday. “Available supply on [American] dealer lots is now 58 [percent] lower than last September, down nearly 1.4 million units.”
One debatably bright spot from the SMMT assessment, however, was an increased take rate of electric vehicles. It reported that over 32,000 new battery-electric cars were registered inside the United Kingdom last month, noting it as a record. Although EVs technically require more semiconductor chips than most modern internal-combustion vehicles — making yours truly wonder how relevant the global chip shortage actually is in the grand scheme of things.
[Image: Gretchen Gunda Enger/Shutterstock]
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