EnU.S. automotive sales are struggling to recover in the face of an ongoing shortage of semiconductors and other components. Panjiva’s analysis of official data shows that sales of all vehicle types fell by 3.7% in July compared to June on a days-adjusted basis, led by a 5.2% dip in sales of domestically-produced vehicles while foreign-built vehicles increased by 1.0%. That also left total sales 7.7% below July 2019’s level.
Source: Panjiva
The continued weakness in sales is largely driven by supply chain challenges, leading the major automakers to consider both the short- and long-term aspects of their supply chain strategies.
In the short-term it’s all about semiconductors.
General Motors’ CEO, Mary Barra, has noted at the firm’s Q2’21 earnings call that for semiconductors “the situation does remain fluid, and the supply chain continues to be impacted by events like what is happening right now with the COVID spike in Malaysia“.
Similarly, Stellantis’s CFO, Richard Palmer has stated that “Malaysia continues to be a problem for us and others coming into the beginning of this quarter“. Looking ahead Stellantis’s CEO, Carlos Tavares has stated the firm expects “Q3 to be difficult but we expect to see some improvement from Q4” such that “it should not be worse in H2 than it has been in H1“.
Panjiva’s data shows Malaysia accounted for 48.5% of all U.S. semiconductor imports in the 12 months to May 31. Shipments had been steadily accelerating, with imports having increased by 68.1% year over year in May and by 41.7% compared to May 2019.
Source: Panjiva
The automakers have also had to deal with higher commodity costs, which have been offset in part by higher prices. General Motors’ CFO, Paul Jacobson, has noted that there are also “embedded price sharing mechanisms in the supply chain agreements themselves” while Stellantis’s Mr. Palmer has cited “strong retail demand, coupled with supply constraints, allowed us to focus on net price and vehicle mix improvements“.
The extended period of plant closures caused by component shortages appears to have driven the automakers to make longer-term supply chain strategy decisions too. As discussed in Panjiva’s July 29 research Ford Motor has outlined a three-pronged strategy including direct engagement with semiconductor makers, increased transparency with suppliers and selective stockpiling.
General Motors’ Barra has stated that the firm is looking to “derisk [the] supply chain” using strategies including “collaborating with semiconductor manufacturers and continuing to enhance transparency throughout the entire semiconductor supply chain“.
The global nature of Stellantis’s supply chain has meant that the firm can “arbitrate the way we break down the supply of semiconductors between the different regions” according to Mr. Tavares. As a result the firm can “protect the best parts of our business if need be in the way we are managing this supply shortage in the future“.
The semiconductor makers are already seeing the signs of change in supply chain approach. NXP Semiconductors CEO, Kurt Sievers, has noted that there are “signs of a structure change in the behavior” from the automakers with a recognition that “just-in-time system is not totally compatible with a 3 to 6 months manufacturing cycle time in semiconductors“.
Mr. Sievers expects responses to include “some more inventory in the extended supply chain” while a second is improved transparency into demand from the auto companies such that NXP is “just moving much closer in a collaboration with the car companies“.
All three automakers are also having to juggle a revised landscape for semiconductor supplies with regulatory change brought about by stricter rules-of-origin requirements under the USMCA trade deal. Additionally, the likely advent of stricter “ Buy American” regulations from the Biden administration may increase the hurdle for sourcing used in government contracts.
Thus far there appear to have been different approaches towards sourcing from outside of North America. Panjiva’s data shows that total U.S. seaborne imports of auto parts excluding Canada and Mexico increased by 7.5% in July 2021 versus July 2019 while imports in Q2’21 increased by 13.7%.
Imports linked to Stellantis have expanded more rapidly than average, reflecting the firm’s global manufacturing and sales footprint and the international arbitrage referred to above, with imports up by 15.1% in July after a 17.5% increase in Q2’21.
Shipments associated with Ford have performed similar to the average, with growth of 6.2% in July. General Motors by contrast appears to have cut back its imports with a 9.2% drop in July 2021 versus July 2019 while imports in Q2’21 were 40.7% lower than Q2’19.
Source: Panjiva
