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Automobiles

Chip shortage slams Korean carmakers’ new car rollouts

The problem will continue to stymie the auto sector into next year, analysts say

By Oct 06, 2021 (Gmt+09:00)

3 Min read

Hyundai Motor has intermittently halted its plants due to the auto chip shortage.
Hyundai Motor has intermittently halted its plants due to the auto chip shortage.

The unprecedented global chip shortage is thwarting automakers’ plans to roll out new vehicles, with some popular models set to be delivered to customers nearly a year after their purchase contracts.

According to industry officials on Wednesday, South Korea’s two largest automakers – Hyundai Motor Co. and Kia Corp. – are facing difficulties meeting customer requests for new cars, telling them to wait for at least four months to buy a car.

For the Kia Sorento hybrid SUV, the company said it can only manufacture about 2,500 units this month due largely to the shortage of automotive chips, while it has already received an order of 41,300 cars, meaning a customer could get a new Sorento as late as September next year in the worst-case scenario.

The delivery of Hyundai’s Tucson hybrid SUV cars is also said to be at least nine months behind schedule.

Ssangyong Motor Co., an SUV and crossover specialist that is currently up for sale under heavy debt, is even raising the prices of its popular models as the company was unable to meet customer demand for new cars.

Ssangyong recently raised the prices of the Tivoli V3 and the Tivoli R-Plus by 700,000 won ($588) and 1 million won, respectively.

Ssangyong Motor recently raised prices on its popular SUV models as it was unable to meet demand.
Ssangyong Motor recently raised prices on its popular SUV models as it was unable to meet demand.

‘PERFECT STORM’

Global automakers for months have expressed optimism that the chip shortage will begin to ease by year’s end. But now, there is an emerging view that the chip shortage has morphed into a structural upheaval for the automotive chip supply chain that could take years to fully overcome, according to the Wall Street Journal.

Audi CEO Markus Duesmann recently said the company has to troubleshoot on a day-to-day basis to tackle the ongoing shortage of auto chips, calling the situation “a perfect storm.”

His comments highlight the problems global carmakers are facing in dealing with the chip supply crunch that has hit car production around the world.

In Korea, Hyundai and Kia have halted their production lines intermittently since January, disrupting the delivery of the premium Genesis models as well as Hyundai’s latest all-electric SUV, the IONIQ 5.

In September alone, the two carmakers had to suffer 30,000 units and 20,000 units in production disruptions, respectively.

Other global automakers are facing similar troubles.

Toyota Motor Corp., which slashed global production in September by 40% from planned levels, recently said it could see output cut to a lower level in October. Other major producers such as General Motors Co., Ford Motor Co., BMW and Volkswagen AG have also reduced their productions.

Global carmakers such as Toyota are also facing production disruptions.
Global carmakers such as Toyota are also facing production disruptions.

HIT BY COVID RESURGENCE

The auto industry’s continuing troubles trace back to the early days of the COVID-19 pandemic, when auto suppliers canceled chip orders because of concern over weak demand.

However, electronics and tech companies have soaked up much of the chipmakers’ capacity, leaving carmakers and part suppliers with a dearth of chips when car sales snapped back by the middle of 2020.

More recently, the industry is confronting supply bottlenecks as components makers are mostly based in Southeast Asia, hit hard by pandemic-related restrictions.

A spread in the Delta variant of COVID-19 in Southeast Asian countries such as Malaysia has repeatedly shut down most of the automotive chip factories that supply chips to companies like NXP Semiconductors N.V., Infineon Technologies, STMicroelectronics, and Renesas Electronics.

The interruption has hit engine control units (ECUs) the hardest. Many plants of the ECU’s elements such as microcontroller units (MCUs) are located in Malaysia, which has 25 chip factories out of 98 in Southeast Asia.

Analysts say the global chip shortage will continue to slap the auto sector, disrupting carmakers’ production plans into next year.

According to market tracker AutoForecast Solutions, carmakers across the globe have slashed their production plans by 10.3 million units, accounting for 13.4% of their 2020 sales of 77 million cars.

Write to Il-Gue Kim and Hyung-Kyu Kim at Black0419@hankyung.com
In-Soo Nam edited this article.
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