The recent Evergreen affair underlines just how much the motor industry is at the mercy of supply chains over which it has little control.

The Suez Canal bottleneck will probably result in some shipments arriving three-to four-weeks late and for car manufacturers it comes after a series of major setbacks: WLTP caused vast delays largely because regulatory authorities could not process homologations quickly enough. At one point VW had 200,000 vehicles awaiting approval and most car makers were obliged to cull low-volume models; then came Covid 19, which drastically slowed supplies from the Far East in early 2020, only for European manufacturers to shut down for much of Q2 as the pandemic hit the continent. A gradual improvement through the second half of the year as companies began to find ways to resume something approaching normality meant that for most OEMs 2020 was not quite the disaster forecast six months earlier. However, a supply problem which was already apparent in 2019 became rather more significant as car companies sought to increase output towards the end of last year. 

Each successive generation of cars requires significantly more processing power and silicon chips as we no longer seem to call them are getting ever smaller yet ever more powerful. Their extremely specialist manufacture is in the hands of a tiny number of Far East suppliers, who, responding to market forces, diverted much more of their production to the games console and mobile telephone sectors where demand was rocketing as locked-down consumers turned to electronics for amusement. The upshot is that the car manufacturers could not and still cannot obtain all the chips they need to maintain production to the point where Ford for one has shut factories for a month this spring.

It is a huge concern and Daimler Benz has even approached the federal government with a view to setting up a chip plant in Germany to offset dependence on the Far East. But even were such a plan to succeed, any substantial restructuring of the supply chain would take years. Procurement managers are in for more sleepless nights yet.

Photo by Laura Ockel on Unsplash

Kieron Fennelly
Kieron Fennelly
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