Automakers: Car Chip Shortage Will Slow Adoption of EVs, Connected Cars

The car chip shortage that has bedeviled the auto industry this year isn’t going away.

That’s according to a Tuesday (Dec. 20) report by the Financial Times, citing interviews with carmakers and chip providers who say increased use of connected car functions and demand for electric vehicles will cause the chip drought to extend well into 2023.

Among those sounding this warning is Onsemi CEO Hassane El-Khoury, who told the FT his company had already “sold out” of silicon carbide chips (SiC), advanced power semiconductors primarily used in electric cars, at least to the end of next year because of demand.

“There’s nothing you can do now to change 2023,” said El-Khoury. “We will be adding capacity every quarter, every month in 2023 to meet our customer demand.”

Jochen Hanebeck, chief executive of auto chipmaker Infineon, voiced a similar warning at a recent event in Munich: “I do expect quite a longtime shortage.”

Meanwhile, Carlos Tavares, CEO of automaker Stellantis, has said the chip shortages will continue to plague his industry next year.

October saw auto retailer AutoNation report that retail sales of both new and used vehicles were below historical levels due to the chip shortage and other inventory constraints.

“Some parts of the industry are at really recessionary levels — which is our new vehicle volume,” AutoNation CEO Michael Manley said.

And earlier this month, a survey by Cox Automotive Dealers showed that U.S. auto dealer sentiment in the first quarter of the year is at its lowest since the start of the pandemic.

The survey — which used interviews with 1,034 car dealers — showed the dealer sentiment index at 43, below the threshold of 50, a sign that more dealers see the car market as weak than those who view it as strong.

“Dealers are normally optimistic, so the drop in the 3-month outlook to a new low in our survey history is particularly noteworthy,” said Johnathan Smoke, chief economist at Cox.

“As the year began, dealers were telling us about one obvious problem: inventory. Now, as 2022 comes to a close, it’s all about the economy and interest rates.”

While inventories have improved, the survey found, they do remain low.

Meanwhile, demand for connected vehicles has grown, fueling an automotive software market that one study projects will have a compound annual growth rate (CAGR) of 15% between now and 2030, according to the “B2B and Digital Payments Tracker®” series, “Reshaping Global Business With Connected Vehicles,” a PYMNTS and American Express collaboration.

“Connected cars will drive the transformation of global wireless data networks to more sophisticated personalized and experiences,” Tatia Adams Fox, vice president and general manager of the Travel and Entertainment National Client Group at American Express, told PYMNTS in an interview for the report.

“They will also drive B2B and B2C businesses to aggressively invest in innovative connected vehicle technologies as well as market and consumer data that inevitably create new revenue streams,” Fox said.