Ford has ordered a month-long shutdown of one of its German factories due to a global semiconductor shortage that is hobbling car production. The move doesn’t affect American buyers, but it is ominous because it halts the production of Ford’s best-selling model in Europe, the Focus. Prior to this, automakers been carefully planning shutdowns to avoid impacting the supply of their most popular models.
The average new car contains between 50 and 150 microchips. The chips power everything from engine timing to tire pressure monitoring systems. These parts aren’t interchangeable. Ford shuttered its Kentucky plant making Ford Escape and Lincoln Corsair SUVs this month because it lacked a chip in the vehicles’ brake system.
In addition to Ford, Fiat Chrysler, Honda, Nissan, Subaru, Toyota, and Volkswagen have all shut some production lines because of the shortage. The disruption comes just as auto sales have begun to recover from a crippling 2020.
Analysts at financial services firm UBS predict that Volkswagen alone could skip production of 100,000 cars in the first quarter of 2021 because of the problem.
Why It’s Happening
The shortage has a complex set of causes. They include chip factory shutdowns due to the spreading coronavirus. Chip producers are redirecting their capacity to support the phones, laptops, and gaming systems that consumers have been buying more quickly during virus lockdowns.
When it Will Stop
Research firm Alliance Bernstein predicts that the shortage will ease in the second quarter. On a call last week, Bernstein’s Arndt Ellinghorst, however, warned that global production may not return to 2019 levels until 2022.
The production pauses have not yet impacted prices, but with production of even popular models now slowing, buyers could see declines in inventory and fewer incentives.
