Semiconductor shortage has already left auto companies in a tough spot as many have shut down plants across North America
Global automotive industry was severely impacted when the Covid-19 pandemic hit the world at the start of last year. The subsequent lockdowns affected production and supply chain of all small and major manufacturing units that had adverse impacts on automotive sales around the world. It took months for the industry to get back on its feet.
At the start of 2021, it was hit by another bump as the world faced a global shortage of semiconductor chips that again halted production of automobiles. It looks as if the slowdown in the automotive industry in the past year is not going to go away anytime soon as it hit another major roadblock.
Crisis Due To Winter Storm in Texas
Automakers, especially in the USA could soon face a shortage of foam used in car seats due to the winter storm that hit the southern state of Texas last month. The Arctic storm led to shutting down of major power stations across the state which is home to many oil refineries. Other than fuel, the oil industry is also responsible for other by-products as well that are key to automobile production.
One of the by-products of the oil industry is propylene oxide which is used to make polyurethane foam which automakers use in the seats of their cars or two-wheelers. Latest reports state that manufacturing plants in the US could run out of foam by March 8.
This has set off major concerns in the US auto industry which are reported to witness a production halt in the next few weeks due to a shortage of foam. While there are other foam manufacturers in the world, it is bound to create a wide gap between demand and supply.
Stance of Major Auto Companies
It is yet to be seen if this shortage of foam also hits the Indian market or not but a global shortage like this is not good news for any auto market around the world. Especially, since all countries are still facing constraints in supply chain management due to the Covid-19 pandemic. Apparently, automakers in the US are monitoring the current crisis as they watch closely what unfolds ahead.
Some companies like General Motors (GM), Toyota and Ford are not too concerned and have maintained that there is no immediate threat to production. On the other hand, Hyundai, Kia, BMW and Stellantis (a merger between Groupe PSA and FCA) said they are closely monitoring the situation.
However, the semiconductor chips crisis continues to rub salt on the wound as it has already disrupted GM’s production with temporary shutdowns at multiple manufacturing plants. As per estimates, GM’s global production could drop by more than 200,000 units in 2021.