PRAGUE, Oct 17 (Reuters) – Czech car makers will produce quarter a million fewer cars than expected this year due to the global shortage of chips and the automotive sector will lose 200 billion crowns ($9.14 billion) in sales, the Auto Industry Association (AutoSAP) said on Sunday.
AutoSAP said domestic passenger car production dropped by 53.1% in September year-on-year, to 56,157 cars.
It said the chip shortage impact would exceed that of pandemic shutdowns last year, and called on the government to activate an aid programme created amid the coronavirus pandemic last year to compensate firms for wages of idled workers.
AutoSAP said production rose 2.9% year–on-year cumulatively in the January-September period to 831,653 cars.
“Already since August, production has been significantly affected by output curbs and the September statistic confirms the negative trend,” AutoSAP said.
The country’s biggest producer, Volkswagen(VOWG_p.DE) ‘s Skoda Auto, has said it would significantly limit or shut production at its Czech plants from next week, possibly until the end of the year. read more
The car sector is the backbone of the highly industrialised Czech economy, employing 180,000 workers, and makes up a quarter of industrial output.
SAP said 120 billion crowns in revenue would be lost at car makers and a further 80 billion at parts suppliers. The 200 billion crowns in revenue equals to about 3.3% of the country’s expected nominal gross domestic product this year.
Reporting by Jan Lopatka Editing by Raissa Kasolowsky
Our Standards: The Thomson Reuters Trust Principles.
How the semiconductor shortage is affecting the automotive sector
Just a few years ago, we were talking about the talent shortage within the semiconductor sector.
Today, we are talking about a very different, but just as damaging, shortage – the semiconductors themselves.
- Ford shut its Germany-based factory for a month
- Volkswagen declared they would build 100,000 fewer cars
- Honda UK shut down for several days
These are just some of the realities of a silicone chips (semiconductor) shortage.
The automotive sector isn’t the only industry being hit. Still, it is largely feeling the impact due to its reliance on the chips to operate power windows, airbags, dashboard displays, catalytic converters and, of course, for electrification.
The silicone chips shortage in the automotive sector is the result of multiple factors, including the pandemic, geopolitical disagreements, factory and plant fires, and freight constraints:
When COVID-19 hit, a drop in sales led to many vehicle manufacturers reducing their orders.
This meant the companies that usually supplied them with their silicone chips moved on to other customer bases such as the electronic and IT sectors.
When automotive demand began to recover, manufacturers were effectively put to the back of the queue; as semiconductors manufactured for video games and 5G smartphones yield higher profit margins than those utilised in vehicle manufacturing.
Geopolitics also played a role, particularly for US and China-based companies. When the Trump Administration tightened semiconductor sales regulations to ZTE, Huawei Technologies and more, these firms began stockpiling in response.
China’s Semiconductor Manufacturing International Corporation also cut off US firms.
Two fires in Japan added to the disruption, particularly for the automotive sector, as one of the factories was manufacturing advanced sensing devices.
Finally, global transportation constraints have contributed to the shortage. Not only is ocean freight struggling to leave ports in China to deliver the chips, but a lack of shipping containers means manufacturers are forced to pay premiums.
It doesn’t look great for airfreight systems either, as vaccine delivery naturally takes precedence, and a shortage in passenger travel is further reducing freight opportunities. The volume of connected and unconnected circumstances has resulted in a shortage of semiconductor chips, meaning that automotive sales will likely be even lower than what was predicted in response to the pandemic.
What’s being done?
In a letter directly to President Biden, groups from the automotive, telecommunications, healthcare sectors and more called on the government to ‘reinvigorate semiconductor manufacturing in the US’
Jen Psaki, the Whitehouse Press Secretary, stated in February that Biden plans to take on a comprehensive review of supply chains and critical goods.
But when it comes to a plan to help the automotive industry and others, not much can be done presently.
That’s because the construction of new factories, which seems to be the apparent solution, requires billions of dollars and many years to construct.
Currently, US silicone chip factories host a mere 12% of global semiconductor manufacturing, and the lead time for manufacturing a semiconductor chip can be up to 26 weeks.
It isn’t all doom and gloom, though. While there may be little short-term gains, some will eventually benefit from the current silicon chip shortage.
Who benefits from the semiconductor shortage?
UK chip manufacturers: The UK’s largest chip factory, Newport Wafer Fab, is looking to cash in on the shortage, using the funding to increase the number of chip wafers it makes from 8,000 to 14,000. This will be particularly advantageous if automotive manufacturers move their orders to UK-based businesses, which aren’t involved in the geopolitical disputes mentioned earlier.
US chip manufacturers: While US-based auto manufacturers will continue to struggle in the short-term, the shortage has called to light the need to build more semiconductor factories ‘at home’.
Semiconductor job seekers: Whether within the automotive industry or another industry that is reaping the benefits of silicon chip production, skilled job-seekers will undoubtedly see even more opportunities arise later down the line.
New driving simulator technology helps car makers to develop cars in shorter time and more sustainably
The latest simulator from specialists Ansible Motion will support car makers to shorten development times and test in a more sustainable way. With simulation now a key enabler for vehicle manufacturers to develop their ever-increasing range of new vehicle technologies and advancements, the UK firm is ensuring they have a capable and effective means of supporting the varied requirements now needed.
Designed to be capable of validating the technologies needed to enable megatrends of electrification, autonomy, driver assistance as well as HMI and vehicle dynamics, Ansible Motion has revealed full details of the production Delta series S3 Driver-in-the-Loop (DIL) simulator.
Manufactured in-house in Hethel, Norfolk, Ansible Motion’s all-new AML SMS2 Stratiform Motion System is at the heart of the Delta S3’s dynamic capabilities, delivering a best-in-class and refined physical experience. The Delta S3’s scalable architecture also means that it can be built and delivered in multiple size options, making it ideal for a broad range of automotive product development use cases such as expert driver assessments, chassis dynamics, powertrain driveability, ADAS and active safety function calibration, V2X studies and HMI design evaluations.
“Our new Delta series S3 addresses a requirement from both OEMs and Tier Ones for a highly capable and versatile driving simulator – a single virtual environment that delivers everything needed to convincingly engage real people with the automotive product development process, early and often, sometimes well before prototype vehicles exist,” says Ansible Motion’s director, Kia Cammaerts. “We have always focussed on achieving high-dynamic and high-fidelity motion for all six degrees of freedom that define a vehicle’s movement. The new Delta series S3 simulator expands on this in all areas, ensuring it’s a dependable tool that meets the demands necessary to validate future automotive technologies.”
The simulator supports car makers’ and suppliers’ desire to develop their cars more sustainably too. On announcing its purchase of the Delta series S3 simulator, Continental said it will support the company’s goal to be the most progressive tyre manufacturer in terms of environmental and socially responsible business practices. This would support its aim to reduce real-world testing by up to 100,000 kilometres per year by 2030 and use 10,000 fewer tyres for development.
ELECTRIC VEHICLES COULD UNLOCK TAX BENEFITS FOR THOUSANDS OF UK SMES
Businesses may be able to claim tax relief while boosting their green credentials by embracing electric vehicles (EVs).
Advisory and accounting firm, Haines Watts has encouraged business leaders to explore the potential tax benefits, both on a personal and corporate level, offered by switching to greener vehicles.
Propelled by the global shift towards sustainability, the UK Government has pledged that all cars and vans will be zero emissions by 2035 – a move which has been bolstered by the Prime Minister’s announcement that new homes, as well as buildings such as supermarkets and workplaces, will be required to install electric vehicle charge points from this year.
In the wake of COP26, UK businesses across a wide range of sectors are rethinking their sustainability strategies, supported by initiatives such as the Small Business Energy Efficiency Scheme (SBEES) outlined in the Government’s Net Zero Strategy.
Adopting low emission vehicles can help businesses meet their sustainability targets while also taking advantage of government incentives. Abid Khan, Associate Partner at Haines Watts, Hornchurch, said: “Choosing an EV is a more environmentally conscious option, making your car usage more sustainable, helping to meet the UK’s 2035 target while also offering potential tax relief.”
Indeed, electric vehicles (EVs) are becoming a far more common sight on British roads. According to ONS data, 44% of the British public think it is likely that they will switch to an all-electric vehicle in the next decade. In terms of consumer preference, the Government’s strategy of making EV the dominant form of transport seems to be gaining traction.
But what are the benefits for businesses and directors when it comes to switching to greener transport such as EVs. As well as helping to meet ever-increasing environmental, social and governance (ESG) objectives, electric vehicles may also provide firms with a tax-efficient alternative to traditional petrol and diesel cars.
Abid explained: “EVs are now a very attractive option for any business owner, director or senior executive that’s looking to upgrade to a new company vehicle. They have a very low benefit in kind (BiK) rate as the tax rate is currently set at 1% for the 2021/22 tax year, making it a highly tax-efficient option for individuals. The Government is also currently offering a ‘plug in grant’ of up to £2,500 for qualifying EVs that meet the relevant eligibility criteria.”
The fact that the plug-in grant covers a range of vehicles, including cars, motorcycles, small and large vans, means that SMEs at varying stages of growth can access EV financial support suitable for their circumstances and business needs.
Some employees may be averse to the idea of an electric company vehicle, because they benefit from claiming mileage expenses. However, Abid confirmed that employees and business owners can still claim their business mileage when using electric vehicles: “Even though you’re not using petrol, you can still claim the government-approved mileage allowance for an EV. The rate per mile will vary where the car is owned by the company or by an employee.”
EVs can be bought outright as a longer-term investment for the company, allowing businesses to claim capital allowances against the expenditure as an asset. Alternatively, EVs can be leased, although capital allowances can not be claimed for these.
As Net Zero approaches and targets become more stringent, there may be the opportunity for SMEs to take advantage of incentives for adopting green energy solutions. EVs offer a way for businesses to stay ahead of the curve in terms of sustainability while also taking advantage of tax and financial incentives.