By Dumi Xaba

South Africa, like the rest of the world finds itself in the grip of a deadly pandemic – COVID-19.

The effect of the pandemic has had devastating effects on lives and livelihoods.

The world’s focus shifted to ways of combating the spread of the virus by imposing strict rules and the manufacturing of face masks and face shields.

The car manufacturing industry has not been spared. Car sales took a knock and manufacturers bore the brunt too. In its report titled Economic Impact of COVID-19 on the South African Automotive Industry, authored by Sharon Modiba, the National Association of Automobile Manufacturers of South Africa (NAAMSA) said; “The uncertainty surrounding the duration and severity of the COVID-19 crisis makes it hard to anticipate how a recovery could unfold for the industry. The COVID-19 pandemic and its attendant effect on markets and commercial activity will likely present a range of challenges to the Automotive industry – challenges that could deepen depending on the severity and length of the crisis in South Africa and globally.

“Naturally, this implies the SA automotive sector’s supply chains and assembly lines have been negatively impacted.”

A number of car makers, worldwide, were forced to even postpone the launch dates of new models as a result of the killer virus. Not even luxury models like Lamborghini whose deliveries dropped earlier during the year by 9% were spared. Ferrari was also suffered from the deadly punches of COVID-19. Their second quarter revenue was down by 42.6%.

The launch of the VW Golf 8 in South Africa was delayed for close to a year.

Most new model order books had to be closed, as manufactures couldn’t guarantee the delivery of new cars. Tentative delivery dates had to be postponed by several months as most countries went into prolonged lock down.

The car industry, unfortunately is not one that offers people the luxury and flexibility to work from home. It is not an option they could settle for hence the heavy impact it suffered.

Global Toyota had to announce that they were scaling back production by 40% due to microchip shortage. From 900,000 units per month to 540,000 vehicles per month. They have managed to stay afloat thus far because they had a surplus of microchip inventory. General Motors, BMW, Ford, Daimler Nissan and Renault were also forced to significantly scale back on production as a result of microchip shortage.

As clearly explained by Patrick Penfield, a professor of supply chain practice at Syracuse University to, “As the world shut down because of the COVID-19 pandemic, many factories closed with it, making the supplies needed for microchip manufacturing unavailable for months.

Increased demand for consumer electronics caused shifts that rippled up the supply chain. Orders began to pile up as manufacturers struggled to create enough microchips to meet the new levels of demand. A backlog began to grow and grow and grow.” Car companies, like Ford, have to predict the number of microchips they will need to produce their cars and order them in advance from one of the microchip manufacturers. As of now, it can take at least half of a year for a microchip order to come in, according to Professor Penfield.

The current demand for microchips is so great that manufacturers cannot make enough to meet the demand at this time, meaning consumers will soon be seeing higher prices for less goods.

Leave a Reply

Your email address will not be published. Required fields are marked *