Chip Shortage To Continue Hurting UK Car Market In 2022

A leading car industry trade group has painted a bleak picture for 2022 and the impact that the ongoing global chip shortage will continue to have during the coming 12 months.

The Society of Motor Manufacturers and Traders (SMMT) was quoted by Reuters as saying that the chip shortage will continue to hurt British car sales throughout this year and into 2023, after making a serious dent in vehicle supply in 2021.

It is no secret that the chip shortage has already severely impacted global car production during 2020 and 2021. In August Toyota warned that its worldwide vehicle production would be slashed by 40 percent in September because of the global chip shortage.

Chip shortages

Then in October the French car maker Renault said it expected to produce at least 300,000 fewer vehicles in 2021.

Intel boss Pat Gelsinger also said last year that while the chip ecosystem was recovering, the global supply chain is stilled stressed, and chip shortages expected to last until 2023.

The chip shortage, caused by unpredictable market conditions during the Covid-19 pandemic, has therefore forced nearly all car manufacturers to slow production while also affecting the availability and prices of computer equipment and consumer electronics.

The production cuts for new cars has, as a result, pushed up the prices of both new and second hand cars.

It has also pushed the price (and availability) of consumer electronics, with high end gaming platforms that are reliant on powerful GPUs being particularly hard hit.

SMMT warning

So the fresh warning from the Society of Motor Manufacturers and Traders (SMMT) should come as no surprise then.

It said around one in six new cars sold in Britain in 2021 was either battery electric (BEV) or a plug-in hybrid (PHEV) and overall new car registrations inched up around 1 percentage point to 1.65 million units versus 1.63 million in 2020.

“Not a great year, coming on the back of an equally poor year,” SMMT chief executive Mike Hawes reportedly said, referring to the impact of the chip shortage on sales which crimped a post-pandemic recovery.

Cars of course use a large amount of chips, in everything from brake sensors to power steering to entertainment systems.

Hawes reportedly said the average vehicle requires between 1,500 and 3,000 of these older chips.

But it should be remembered that the computer chips found in cars, vans and lorries are not considered leading edge or sophisticated.

Indeed, often these car chips are fairly old, and therefore proven and robust.

“We think demand is still there and demand is still strong,” Hawes said.

He added that the general view was that the chip shortage would undermine the market over the course of 2022 and this would “flow through to 2023.”