Global shift in demand leads to new automotive challenges

Written by, Alicia DeCroix, Marketing Manager at dlhBOWLES, Inc.
February 8, 2021

The world continues to battle COVID-19 with multiple vaccines now available, unfortunately roll-out is slow at best and it is hard to predict when enough people will be vaccinated for life to return to “normal”.  Automakers and suppliers continue to deal with isolated infections and absenteeism, but production has not been directly affected by infections since very strict protocols are in place to protect workers.

The latest ripple in the automotive industry began to really take form in January as a global shortage of semiconductors began shutting down production a week or a shift at a time for various automakers and manufacturing plants around the world.  The semiconductor shortage is a direct consequence of the wide-spread automotive shutdowns and reduced production that occurred nearly a year ago and was exacerbated by an increase in demand of consumer electronics.

The pandemic has changed the way we work, school, and entertain and plainly explains the priority on electronics.  More people than ever are working from home or attending school virtually.  Companies had to quickly replace desktop computers with laptops and schools had to issue computers to students to attend school virtually.  In addition, stay at home orders and the lack of entertainment outside the home led to increased demand in gaming systems and other personal electronic devices.  This increase in demand grew in the cold winter months as less people brave the outdoors for recreational activities.

Manufacturers of semiconductors adjusted their production levels and production priorities last Summer to meet the increase in demand for consumer electronics and a lower projected demand for vehicle production.  When vehicle production came storming back in early Fall to pre-pandemic levels, adjustments could not be made fast enough to adjust to the new level of demand.

So here we are, early February with nearly 300 thousand vehicles projected for lost production so far in North America, and 1.2 million globally.  Projections show that this issue will last at least through March 2021, but automakers are planning to make-up that volume in the second half of 2021 as vehicle inventory levels are historically low and vehicle sales remains high. The demand is there – supply needs to rise to meet it.

Of course, it can’t be automotive without multiple supply challenges stacked on top of each other.  More issues to watch in coming months are material shortages (steel, aluminum, plastic), Logistic delays (air, ocean, and port delays) and finally sea container shortages.

Buckle up for another wild ride in 2021.


About the Author

Alicia DeCroix is the Marketing Manager at dlhBOWLES, Inc. in Columbia, Maryland.  She has a Bachelor’s degree in Business Management from Eastern Michigan University and a Master of Science in Management, Strategy, and Leadership from Michigan State University.  She has worked in the Automotive industry for 20+ years and is a seasoned veteran in forecasting and analyzing the Automotive Industry providing stakeholders with insight to drive business forward.