The chip crisis and its implications for global light vehicle production are nothing new. For the past 18 months, the industry has suffered from repeated parts shortages and supply chain issues that have caused automakers to halt production at the drop of a hat.
The three largest Light Vehicle production markets in the world: North America, Europe, and China have held the spotlight when it comes to the significant loss of volume due to these issues. As for semiconductor shortages, Europe and North America are one and two in terms of unrealised production loss, with European disruption likely to reach over 2 mn units and North America over 1 mn. The South American market is no different from other regions as chip shortages continue to cause unpredictable downtime leaving OEMs struggling to keep production lines running.
Although total disruption for South America is not as sizable in terms of volume as it is in other regions, the repercussions are significant for its market. For full-year 2022, the current estimated impact of semiconductor shortages is nearly 188k units of unrealised production. Total production for the region is anticipated to reach just 2.7 mn units with current disruptions. In 2019, prior to COVID-19 and the microchip shortage that followed, this emerging market was producing at volumes nearing 3.3 mn units. This loss of volume is equivalent to 7% of total output, placing South America’s shortfall closely behind the 9% loss expected in North America. India’s volume loss is slightly less than South America’s on a percentage basis, coming in at 4%, although the anticipated loss in volume terms is higher in India.
As the end of the first half of the year is nearing, Volkswagen Group has suffered the most in the South American region relative to other OEMs, with implemented downtime and layoffs due to supply shortages amounting to nearly 55k units of unrealised production for the automaker. Most of the impact hit the Gol and Voyage lines, which are expected to end production in the second half of this year. VW’s impact accounts for 44% of the total 125k units of lost volume estimated at this point in the year, an outsized proportion given that VW volume typically only accounts for an average of 16% of total output per year in the region. GM faces the second-highest volume loss, although it lags far behind VW at only 10k units of unrealised production. In addition, three OEMs – Stellantis, RNM, and Honda – are expected to pull winter vacations traditionally scheduled in July ahead by one to two months. The bringing forward of the summer shutdowns is an effort to mitigate supply shortages later in the year, although the region has little hope that the disruptions are likely to end any time soon.
The fluidity of the current environment makes disruption estimation a moving target. Supply shortages and supply chain interruptions are anticipated to persist in the short term as OEMs continue to scramble to mitigate impacts. As a result, the second half of the year is not expected to show signs of a great recovery, pushing any sizable alleviation out to mid-2023. For South America, we currently forecast the market to begin to reach pre-pandemic levels of production in 2024, with an estimated 3.2 mn units expected during the year if full recovery is viable by that time. This falls in line with other regions, including North America and Europe, where recovery to pre-pandemic levels is also not expected until 2024.