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Lows of supply and demand

Lows of supply and demand

Tessa R. Salazar

Automotive and allied industries continue to make do with persistent global stock woes

If you’ve been on the hunt for new cars lately, chances are you’d be met with delays in the model that you’ve been eyeing. The wait could take anytime from several months to a year. The same is happening with auto parts. Sometime last July, I tried asking an auto industry insider the availability of a particular high-end SUV that a reader had been intending to buy. The answer I got was that there was yet no Philippine allocation for this particular SUV. The insider added that there was a “very low” supply allocation across the network, as car companies had been severely affected by global parts restrictions.

Three months ago, another insider told me that all Japan CBU (completely built up) units had been affected by the supply parts issue, but if an interested customer for a particular model would be patient enough to wait up to six months, he or she could place an indent order.

There are thousands upon thousands of important parts in an automobile, and if any one of those parts suffer delays—either in manufacturing or shipping—then the entire assembly suffers a slowdown. UK-based Motability cited, in its Oct. 3, 2022 Q&A, that the main issue affecting new car supplies has been a global shortage of semiconductors, or “chips,” which feature in most electrical items, from washing machines and home computers, to TVs and new cars.

It added, “Each new car features around 1,500 of these chips, which act as the ‘brain’ of the vehicle, but high demand for electrical items during the Covid-19 pandemic has led to a shortage of semiconductors. This shortage is expected to continue well into 2023. On top of this, factories across the world are continuing to be affected by staff shortages due to Covid-19 isolation requirements and wider supply chain problems caused by the pandemic.”

Motability said that these supply chain issues can often mean that vehicles in production are unable to be completed due to delayed parts, leading to further delays and changing delivery dates. “In many cases, cars are taking more than six months to be delivered,” it wrote.

As far as our collective memory goes, this global supply issue is unprecedented. The Philippine market, like its counterparts around the world, is adversely affected.

Lawyer Rommel Gutierrez, Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) president, confirmed as much: “Yes, we are still experiencing delays in the arrival of some models,” he said. However, he declined to comment further on how the chamber itself is addressing the issue.

Ginia Domingo, president of Pilipinas Autogroup Inc, which launched Tata Motors’ Intra V10 truck on October 13, reassures customers: “So far, the global supply of chips has not affected the production of the Tata Intra V10 and the Super Ace Mint.” She added, “Our supply of spare parts is ensured with the ongoing revitalization of the Tata dealer network. Pilipinas Auto has also partnered with Lazada, making Tata genuine parts easily accessible to our customers.”

When the chips are down

Ferdinand Raquelsantos, president of the Philippine (Auto) Parts Maker Association, observes that the global parts supply issue isn’t close to being resolved. “Personal experiences shared by my colleagues (point to the fact) that the supply of CBU vehicles from China is (still) short. Likewise, CBU motorcycles from Thailand have been experiencing IC chips shortages in their production, so there continues to be limited CBU supply to the Philippine market.”

He added, “Some of our members have anticipated these shortages by placing advance and additional quantity allowances on their orders of electronic parts,” thus ensuring that the local auto parts members would remain consistent with their customers’ requirements and timely deliveries.

Raquelsantos agrees that computer chips are the biggest problem as far as supply goes. “I don’t have data. But chips now are used all over the vehicle, from radio to sensors to computer boxes.”

Maximize the supply chain

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In a July 28 interview during the launch of the Ford Ranger and the Everest in Arcovia in Pasig City, Ford Philippines Managing Director Mike Breen remarked: “When we look at and understand what the implications of those supply chain shortages are, our focus in bringing these new launched vehicles into the market is to do our best to maximize the supply chain and make sure that we get as many semiconductors as we possibly can to satisfy demand. Sometimes, it’s not as quick as we would like, but I would say we’re making really great progress. It’s really important to talk about not only the vehicles but also the impact on parts, because the semiconductor challenges that are present aren’t only tied to vehicles—but the supply chain impacts everything.”

He continued, “Ford has been really proactive in managing our partners, and suppliers, to maximize the supply. It hasn’t been ideal, but we feel we’re in a good place to be able to take advantage of the opportunity as we move into the final quarter of the year.”

Breen stressed, “When it comes to availability of Ford as far as the Philippines (is concerned), we’re really fortunate because we are connected to the global allocation processes. We benefit from the actions taken at the global level. And so, we focus on ensuring that if there are challenges with the specific configuration we can get the vehicle, we find ways to adjust and satisfy customer requirements, and that’s where we try to focus the supply.”

When will it end?

Right now, the question on everyone’s mind would be, “So, when will this problem end?” Sadly, the answer is that there are no quick fixes to supply disruptions.

S&P Global Market Intelligence said that “consumers have to wait longer and be less picky when choosing vehicles and accept that there are certain features that may not be available due to the chip shortage. This globally synchronized, supply-led disruption is something that has never happened in the modern history of the automotive industry—in other words, a supply-led environment in which consumers cannot obtain vehicles on a global basis because of limitations on manufacturing inputs.”