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October 2023 | Products

Global Component Crisis: Why did the shortage of materials for their production endanger the automotive market?

In the last years the automotive industry has faced a challenging period, with two crises happening at the same time: the COVID-19 pandemic with global impact and deep influence in the markets (including the car sector) and a chip shortage, essential components for car manufacturing. This took the sector into a global chip shortage which after three years seems to start to be left behind. 

At the initiative Autoparts from Spain, we go in deep on what the main reasons of this global crisis have been and how it has affected the automotive components market. 

 

Global chip shortage: how did it start? 

 

The global crisis of components is the result of a series of interconnected factors which brought the perfect storm for a shortage of key materials used in car component manufacturing. Among those factors are: 

Supply chain disruptions 

The COVID-19 pandemic caused serious disruptions in the global supply chain. Travel restrictions, factory closings and shortage of workers affected material production and transport which resulted in meaningful delays. 

Chip shortage 

The automotive industry ability to to build state-of-the-art vehicles depends a great deal on chips. The chip shortage, worsened by the increase in demand for electronic products, severely impacted the car production.  

Increase of demand 

Regardless to the difficulties, the car demand kept going up in many places in the world. This demand increase played an additional role to press up the supply chain, since factories struggled to keep up. 

 

How did this global crisis affect the automotive sector? 

 

Global chip shortage had a meaningful impact in the automotive market. Car manufacturers have been forced to take their production down or even halt it entirely in some cases. This led to decreasing car availability in the market and higher prices. 

Also, several companies in the sector were affected by higher production costs because of the shortage of components and materials. This led to lower margins and therefore, a stronger pressure on the companies’ profitability. 

 

How did the Spanish automotive suppliers face the Global chip shortage?  

 

The role of the automotive component suppliers has proven to be crucial to face this crisis. Among the actions taken to face this situation are the following: 

Diversification of supply sources 

Searching for alternative sources of supply of materials and components has been essential to decrease single-source dependence and ensure a constant flow of supplies 

Developing alternative materials 

Research and development of alternative and sustainable materials helped to overcome the shortage of raw materials and decrease dependency on critical resources. 

Collaboration and flexibility with car manufacturers 

Working closely with automotive manufacturers to understand their specific needs and make a flexible production and delivery have been key to face their challenges. 

Investments in innovation 

Automation and investment in technology increase efficiency and shorten production times. For decades, the Spanish industry of automotive components and equipment has been a world leader because of its innovation, technology, experience and quality 

The Spanish sector of automotive components has always supported research, development and innovation, being conscious of the sector’s dynamism and the need of bringing up new products which meet the car manufacturers’ needs. In fact, the Spanish industry of automotive suppliers is one of the leading sectors in R+D at local and European level. This trend remained the same even during the worst moments of the crisis. According to Sernauto -the Spanish association of automotive suppliers- in 2022, the sector increased almost a 12% its investment in productive capacities, investing a total of €1,520 million in order to stay as a competitive, innovative and adapted industry able to meet its clients’ needs. Besides, suppliers’ R+D investment increased 5.8% percent reaching €1,231,5 million which is 3.3% of the total billing, three times the industry’s average. 

If you want to learn more about the Spanish sector of automotive components, you can check its history out here.

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