Shortages in semiconductors and raw materials threaten both the price and supply of new vehicles, according to new research…

Raw Material Shortages

New research, conducted by Grant Thornton and Cox Automotive, suggests that ongoing shortages in raw materials and semiconductors could ‘threaten’ both the price and supply of new vehicles. A number of automakers have announced long waiting lists or reduced specification options. Jaguar Land Rover recently told leasing companies that some of its models would come with a year-long waiting period. In addition, Mercedes-Benz has reduced the scope of specification options from some of its models “from late June production and until further notice”. 

Toyota has also announced a 40% reduction in overall vehicle production until September. It originally planned to produce 900,000 vehicles next month, a figure that’s now been reduced to just 540,000. Practically every manufacturer has also been hit by ongoing and global supply-chain issues with semiconductors, too. A problem that, as of now, shows few signs of getting any better.

‘Increasing Evidence’ of Supply Issues

Owen Edwards, associate director at Grant Thornton UK, said the evidence for long-term supply chain issues was mounting. He explained, “there is increasing evidence of supply chain issues, shortages of raw materials and high raw material prices, which could affect the price and supply of new vehicles. The demand for hot-rolled coil steel used in the automotive industry for chassis has increased significantly in 2021”. 

But it’s not all doom and gloom according to Edwards. He said that automakers “are resistant to disruption and adversity, and demand for vehicles is still robust. This can be attributed to the way vehicles are sold, through structured finance products”. He continued, “we’ve enjoyed a prolonged period of low-interest rates, making borrowing affordable. Demand is expected to continue this year, but clearly questions remain around the short supply of vehicles.”

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