Car Assembly Hits Lowest Level in 14 Months

The automotive industry continues suffering as assembly dropped by 26.5 percent in July to 221,843 light vehicles, its worst level in the last 14 months, because of the semiconductor chip shortage and the COVID-19 pandemic.

General Motors, Volkswagen and Ford are the three most affected brands, following the technical suspension of work caused by the electronic component shortage crisis. The brands reported drops in production of 53 percent, 52 percent and 47 percent, respectively. Less production led to less exports, which suffered a 23.6 percent decrease.

According to INEGI, the 202,021 exported units are 62,499 less than the ones the industry had in July 2020 and exports to the US dropped by 25.7 percent. In total exports, Ford was the most affected brand with a 75.5 percent drop, followed by Volkswagen with 64.5 percent, General Motors with 44.5 percent and Mercedes Benz with 43.3 percent.

North America, the Most Affected Region

Semiconductor chip shortage has affected the entire world but North America is suffering the most from the lack of supply. Also, COVID-19 worsened the shortage situation, causing plants to close, including GM’s in San Luis Potosi. Despite the optimistic forecasts by some experts, AMIA said that the semiconductor chip shortage will continue at least until the last quarter of 2021.

Arturo Herrera, Minister of Finance of Mexico, announced earlier in 2021 that the shortage will not only affect production, but will also put pressure on consumer prices for a considerable time. “We are going to have this type of pressure for the next two years,” he said. 

As if there was not enough trouble for automakers, a Renesas Electronics’ manufacturing plant in Japan, which supplies roughly a third of global semiconductor chips for cars, faced a fire in March, reported MBN. However, the plant is back to operations. Last week, Hidetoshi Shibata, CEO of Renesas Electronics, said that the company is working 1.7 times the pre-fire levels and that he expects demand by computer manufacturers and automakers to remain strong through mid-2022. “It will likely take till the middle of next year before the supply-demand condition starts easing,” he said.

In 1H2021, Mexico produced 815,544 light vehicles, 20.2 percent more than in the same period of 2020. However, the numbers pale then compared to pre-pandemic levels: 2019’s total production reached 2.27 million light vehicles, 20 percent more than 2021’s.