A shortage of semiconductor chips and explosive growth of electric vehicles emerged as arguably the two biggest stories in the global auto industry in 2021. The odds are strong that they will dominate headlines again in 2022.
So, if you wanted to get ahead of the curve and know more about what’s happening, where would you look? Are there particular factories or inventory lots that could reveal major clues?
Let’s start with the shortage of semiconductor chips, a legacy from the early days of the COVID-19 pandemic that has yet to fully resolve itself, causing massive headaches for auto manufacturers, all of whom need these critical parts to build today’s fleet of vehicles.
But rather than cut production levels or shutter assembly plants, some companies have decided to keep humming along, moving vehicles that are all but complete (except for the missing chips) away from the factory and onto separate lots.
Here, these vehicles sit until the day comes when they can be brought back to the factory floor and outfitted with semiconductor chips.
Car manufacturers have been forced to look far and wide for possible locales to temporarily store vehicles. Lots have sprouted up practically overnight, transforming university campuses, racing tracks and vacant blocks into symbols of the global supply chain crisis.
By monitoring these overflow lots, you can also gain additional insight into the situation. Are more or less vehicles being stored there? The answer reveals whether the semiconductor shortage is improving or worsening.
Ursa Space’s customers now have access to this very intelligence after we added coverage of overflow lots to our existing monitoring of global auto manufacturing facilities.
The overflow lots are in California, Ohio, Indiana, Michigan and Missouri. We utilize satellite imagery to quantify the level of fullness for each lot, the same technique used to calculate our Global Auto Manufacturing Index (AMI), described in earlier blogs.
A few takeaways from the data include:
- As expected, overflow lots began to fill significantly in the April-June 2021 timeframe
- Many reached levels last summer that were orders of magnitude higher than at any point since our observations began in 2016.
- The most dramatic jumps occurred at lots used by General Motors in Fort Wayne, Indiana and Ford in Dearborn, Michigan.
- However, both lots partly emptied in mid-December, falling well-below summer 2021 highs, but staying above pre-crisis levels.
- A similar trend was observed at other overflow lots in late 2021.
This data from late 2021 showing some overflow lots becoming less full suggests the situation may have improved slightly, with more vehicles being brought back to the factory floor presumably because semiconductor chips were available.
Even if there’s been some reprieve, the problem of semiconductor shortages doesn’t appear to be going away anytime soon. It takes time and serious investment to increase production. Nor is supply the only consideration. One of the issues dogging the auto industry is that other buyers, such as smartphone makers, represent a significantly larger market opportunity for chip producers.
Ford decided to take matters into its own hands, signing an agreement with a semiconductor supplier to design and develop chips for Ford vehicles.
Demand is also set to increase alongside the anticipated growth in electric vehicles, which require roughly double the number of chips as a non-electric vehicle.
With the spotlight shining brighter than ever on this segment of the auto industry, Ursa Space recently expanded coverage of EV manufacturing in China, the world’s biggest producer of electric vehicles.
We added factories in China operated by Fujian Motor, SAIC Motor, JAC Motors and Mercedes-Benz. This is in addition to our existing coverage of EV plants in China, which included FAW-Volkswagen, SAIC-GM and Tesla.
These facilities are among the dozens included in Ursa Space’s Global Auto Manufacturing Index (AMI), which captures vehicle production trends using satellite imagery in the following countries:
- Americas: Brazil, Mexico, United States
- Asia: China, India, Japan, South Korea
- Europe: France, Germany, Italy, Russia, Spain, United Kingdom
With over 5 years of historical data, a baseline is established to know whether current levels are higher or lower than normal.
Some observations from the data include:
- China fell sharply in mid-2021, but rebounded and climbed the rest of the year and into the first week of 2022.
- As a result, China enters 2022 looking stronger than other countries within our coverage.
- The US has displayed a similar trajectory, hitting troughs in mid-2020 (due to COVID-19 labor restrictions) and mid-2021 (due to semiconductor shortages), managing to rebound somewhat in both cases.
- However, unlike China, the US trailed off in late 2021 and entered 2022 without a clear direction forward (See graph below).