The global car manufacturing rebound is stagnating amid the threat of strikes and non-chip part shortages.
Manufacturers are seeing the downside of blaming semiconductors for production shortages.
Initially, the chip industry was a good scapegoat for any issues in the supply chain or with demand. More than two years into this problem, though, it reflects poorly on a manufacturer or supplier who has not secured sourcing of chips.
Companies are specifically denying that the chip shortage is the rationale for production issues, requiring more investigation to verify the validity of those claims.
A stagnation in the domestic market is pushing local automakers in China to look elsewhere for expansion. Exports have always been the long-term plan for the relatively young automotive industry in China and the impressive year-over-year growth has delayed that move while the manufacturers satisfied their home market. With China looking at the potential for its fourth straight year of contracting local demand, the larger manufacturers are investing in assembly facilities outside of the country.
BYD is opening a factory in Thailand; state-owned Changan is also looking to open a plant in south-east Asia in the next few years; state-owned GAC is investigating the Indian and Mexican markets; and the growing success of MG will have state-owned SAIC opening new plants in addition to the operating factories in Thailand and India.
North American production remains on track to hit 15.5 million light vehicles in 2023, a 9% increase over 2022 production. Honda’s year-to-date production is up 13.3% over the prior year and production at Ford is up 11.9% through February. Toyota’s North American production is up 8.1% for the year to date while Subaru was able to increase production 6.6% over the prior year.
Production is still being slowed by the chip shortage but is moving in a positive direction.
One of the biggest risks to the North American production outlook is the upcoming labor contract negotiations between the unions (UAW in the US and Unifor in Canada) and the Detroit Three set to kick off this summer. It’s possible a strike at one or all three automakers could happen but that is not our base case as of now.
Josh Shastal, Sam Fiorani