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News Article

Automotive Industry will Recover in 2024: S&P

By Rodrigo Andrade | Thu, 08/18/2022 - 17:24

Semiconductor demand has skyrocketed in the past few years, but their production is still limited because only a few companies and regions possess the technology and resources to manufacture them. During 2022, automotive companies have been forced to pause production several times due to the supply chain challenges caused by their scarcity.

In this scenario, the automotive industry will only be able to stabilize the production of light vehicles in 2024, said Guido Vildozo, Senior Manager Americas of Light Vehicles Sales Forecasting, S&P Global Mobility. Only after manufacturing stabilizes will sales increase, he added. While semiconductor production increased by 15 percent in 2022, modern vehicles require twice as many chips. In 2017, the average vehicle used 700 semiconductors, while in 2022 they require about 1,600, said Vildozo.

“[Production] is growing 15-18 percent but the additional 7 percent of semiconductors per unit increase, coupled with the fact that the hybrid and plug-in hybrid cycle will also increase, puts pressure on semiconductors. That is why [automotive manufacture] will not be normalized until 2024,” said Vildozo to El Economista.

Taiwan Semiconductor Manufacturing Company (TSMC), which covers 70 percent of the global market, will increase its production capacity by about 15 percent. On July 20, 2022, Volkswagen and STMicroelectronics announced an alliance with TSMC to design and distribute new semiconductors to address the microchip scarcity, as reported by MBN.

“The auto parts market is no longer just mechanical, plastic, rubber and textile components. New vehicles are equipped with screens, systems and advanced technologies, including dashboards and security systems, which require different types of parts and components. Auto tech is changing the supply chain and it is crucial to develop more talent specialized in the field and to upskill the workers who are already on the production lines,” said Francisco González, Executive President, National Auto Parts Industry (INA), to MBN.

The increase in demand for microprocessors chips has led many to explore their production. This month, President Andrés Manuel López Obrador announced that the state will focus on the exploitation of lithium, a key component of semiconductors. “We have lithium that we could sell to anyone, but the priority is to strengthen the automotive industry in Mexico. We are analyzing this and we are very much looking forward to resolving our priorities based on the characteristics of the company” said López Obrador, as reported by MBN.

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Rodrigo Andrade Rodrigo Andrade Junior Journalist & Industry Analyst