TechTalk Chery OMODA 5

Published on October 31st, 2022 | by Daniel Sherman Fernandez


Automotive Supply Chains Will Remain A Weak Link In 2023

According to a recent report from the Economist Intelligence Unit, it looks like the global supply chains for the automotive segment, as well as other segments will remain uncertain.

In their detailed report which was shared with, they say, ‘although a slowdown in demand has made supply-chain blockages less acute, they will continue to hold back production in 2023.

Semiconductors will remain in short supply, with new capacity not due to come into operation until 2024’.

Some, might ask why there is a sudden need for more semiconductors? Well, the on-going global semiconductor shortage continues to squeeze the supply of chips used in the automotive industry and almost every manufacturer has faced production delays and temporary shutdowns as they wait for the chips they need to finish building high technology new cars on the assembly line.

The shiny center console touch-screen in your new car (even simple cars like the Perodua Alza and Proton X50) is essentially a computer tablet and this is just one area where chips play a vital role.

Meanwhile, the escalating tensions between Taiwan and China will pose another risk. Automakers around the globe will also face challenges in acquiring metals such as nickel, cobalt, steel and aluminium.

A shortage of these metals will make it harder to assemble EV batteries. Even the supply of lithium, a vital battery metal, could be affected by zero-covid policies in China, the world’s largest lithium refiner.

In order to cope with this challenge, governments are increasing local sourcing. The US will use the CHIPS Act, passed in 2022, to spur domestic semiconductor production and research. The US has also published a critical mining strategy to increase its local supply of rare earths and other minerals, thus reducing its reliance on China.

Rare earths are vital to battery production. Meanwhile, India is seeking to change laws to allow private miners to extract lithium domestically, as well as seeking to acquire lithium and cobalt mines overseas.

Europe’s biggest supply challenge will be the energy crisis. Some vehicle and parts makers are having to cut production to reduce energy costs. They may also have to prepare for power cuts.

Given close- knit supply chains, this will have knock-on effects throughout the automotive sector.

A recent report from Reuters warned that, under a worst case scenario, Europe’s energy crisis could cut its car production by close to 40 percent, or more than 1 million vehicles, per quarter through the end of 2023.

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