Motor industry executives are trying to measure the local impact of a global shortage of semiconductor chips, which is playing havoc with vehicle manufacture.
It is estimated the shortage could cost motor companies and their components suppliers around the world more than $60bn (about R857bn) in revenue this year.
By one estimate, in the first quarter alone planned industry production fell short by 1-million vehicles. Global vehicle production in the first quarter of 2019 was 23.2-million and in the first quarter of 2020 it fell to 17.9-million.
In SA, dealers report that several vehicle models are in short supply. Local manufacturers and importers confirm that the semi-conductor shortage is affecting stock availability. This, in turn, is slowing recovery in the new-vehicle market after last year's Covid-induced sales collapse, as some consumers are told the cars they want are unavailable.
The full scale of the local problem is not clear.
Mikel Mabasa, CEO of the Automotive Business Council, says: "We have requested data on this from our members so we can better understand the size and impact." Until the process is complete, "any estimates will be speculation".
Semiconductor chips are an integral part of modern vehicles. Besides controlling infotainment systems - including radios, DVD players, navigation and driver information - they also manage active operations like power steering, brakes, cruise control and other advanced safety systems. Some vehicles contain hundreds of semiconductors. This number will grow with the development of autonomous, self-driving vehicles.
The trouble is that these semiconductors and their chips are in demand everywhere - in laptops, smartphones, gaming systems, watches, even in refrigerators. Manufacturers constantly struggle to meet demand. So last year, when Covid-19 forced motor companies to slash production, chip producers simply sold their goods elsewhere.
Now the motor industry is up and running again it finds it has lost its place in the queue. Even though total chip sales are up by more than 10% this year, the industry can't get what it needs.
It doesn't help that some major chip producers have capacity constraints. A drought in Taiwan has starved a global producer of the high volumes of water needed for the manufacturing process, and the ongoing trade war between China and the US has also had an effect on hi-tech companies.
A report by the UK-based IHS Markit automotive consultancy says longer supply lead times caused by supply constraints are particularly harmful to the motor industry, which usually relies on rapid-response supply chains.
It says: "An MCU [microprocessor unit] that typically takes 12-16 weeks to manufacture will need lead times of 26 weeks and even 38 weeks for in-demand components. Lead times for nearly all chips are currently longer by one to two months."
The report adds: "The supply chain is complex and handling its dependencies along the chain through a carefully managed arrangement of ordering and maintaining an inventory balance is critical to on-time supply. This balance is easily disturbed by unusual market dynamics, such as the Covid-19 pandemic."
Estimates of when chip supplies could return to normal range from the third quarter of this year to the first quarter of 2022. Producers are expected to use the situation to increase prices by 10%-15% in coming months, says IHS Markit.
It says the issue has caused motor companies around the world to cut production and send workers home. Those most affected include Volkswagen, Audi, Ford, General Motors, Honda, Renault and Mazda. GM has said the situation could cut its 2021 earnings by $1.5bn-$2bn. Ford says the impact could be $1bn-$2.5bn.
In SA, Ford is among several companies to confirm its local operations are affected. Its Tshwane assembly plant builds the Ford Ranger bakkie and variants, mainly for export. The company says: "We are working closely with suppliers to address potential production constraints. Our teams continue prioritising key vehicle lines for production, making the most of our available semiconductor allocation."
The Volkswagen group in Germany, in a statement including its South African subsidiary, says the shortage is expected to continue until at least midyear. It hopes "to catch up on unbuilt vehicles as much as possible in the second half".
Indian company Mahindra, which assembles vehicles in Durban, says it hopes to overcome its current chip shortage "within the next two months".
Truck and bus manufacturers are also affected.
Michael Dietz, CEO of Daimler Trucks Southern Africa, says some companies have been forced to reduce production. His company's East London assembly plant is unaffected so far but "the longer the crisis continues, the more likely we will be impacted".
There was talk some years ago, in early debate about SA's Automotive Masterplan that will come into effect on July 1, that infotainment and other microchip technology production could happen in SA.
Renai Moothilal, director of the National Association of Automotive Component and Allied Manufacturers, says: "The production of high-value electronics was among the early objectives of the masterplan. As things stand, we are hostage to the international semiconductor situation. If we could bring the manufacturing technology here, it would no longer be an issue."
However, Toyota SA, the local industry's biggest vehicle manufacturer, thinks that's probably not feasible in the short term.
The company, which says its Hilux and Fortuner models are most affected by the current shortage, says: "Semiconductor localisation is not on the cards at this stage as this industry is already entrenched [through highly specialised skills and equipment] in countries such as Korea, Taiwan, Japan and the US.
"Our focus in the mid to long term is to localise relatively simpler electronics such as sirens and electric control units. These components will use semiconductors which will probably be sourced from Taiwan and Japan."
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