A new survey conducted last month by Automotive News about the global chip shortage finds that almost everyone in the auto industry thinks it’s a big problem.
Today, according to the survey, 53 percent of respondents said they source their chips from outside the U.S., and 55 percent are looking for alternative chip sources outside the country.
Changes are happening, of course, from temporary production pauses and a shift to models that are either in high demand or require fewer chips.
The auto industry is fully aware just how bad the current chip shortage is. Anecdotally, this has been clear for a while. Ford CEO Jim Farley, for example, recently said that the chip shortage is “perhaps the greatest supply shock” he’s ever seen. Automotive News used that quote in a new survey of automakers and suppliers called Examining the Global Chip Shortage, which gives us plenty of survey data to back up the feeling that this is a big, big deal.
Perhaps the most surprising number in the survey is that only—yes, only—93 percent of respondents said that they think the chip shortage will have a severe impact on the auto industry. The survey was conducted a month ago, before recent estimates put the shortage’s impact on the auto industry at $110 billion in lost revenue this year. But even in January, the estimates were around $50 billion, which apparently wasn’t severe enough for 7 percent of respondents.
There’s also the feeling that the chip shortage will stretch out for most of the rest of the year. Almost three-quarters of respondents, 72 percent, said they expect the chip shortage crisis to impact the industry for at least six months.
Just a reminder that the shortage of the chips, used in cars, computers, and other products, was caused by worldwide demand for electronic goods that intensified because of the coronavirus pandemic, along with inadequate planning in the supply chain and weather problems. As the New York Timespointed out, a new vehicle can have up to 100 of these semiconductor chips on board; they’re used (and needed) in components from touchscreens to transmissions.
While there have been efforts to start making more semiconductors in the U.S., newly proposed plants will take time to build and start producing chips. The survey provides us with some insight into where automakers and suppliers are getting their chips now: 53 percent get them from outside the U.S. today and 55 percent are looking to source chips from outside the U.S. in the future. Forty-eight percent said they’d rather buy chips from domestic suppliers.
Survey respondents were somewhat uncertain about which segments of the industry will be most impacted by the shortage. Half (49 percent) said it will be the automakers, while 30 percent believe dealers and retailers will be hardest hit, and 23 percent said it will be the suppliers.
If there are bright spots to be found in the numbers, they lie in the way the industry is adapting to the situation.
Arnold Kamler on his company’s growing sales, bike riding
Bicycle and sports equipment sellers are facing a second bicycle shortage after an initial shortage occurred in 2020 as manufacturers continue to struggle with high demand and COVID-19-related supply chain challenges.
Sales for traditional and indoor bikes, as well as bike parts, were up 75% to $1 billion in 2020 compared to 2019 as more people looked to outdoor activity amid the pandemic, according to June 2020 research from NPD, an industry analysis and advisory services group that helps retailers and manufacturers.
BIKE SHORTAGE CAUSED BY CORONAVIRUS PANDEMIC LIKELY TO SPIN THROUGH 2021, SOME RETAILERS SAY
That trend has continued into 2021 U.S. retail bike sales grew 60% compared to the same period in 2020, according to NPD Sports Senior Industry Adviser Matt Powell. He told Fox News, however, that while he expects sales growth to slow in 2021 compared to last year, they “will remain well above 2019 results.”
“There are serious inventory shortages due to the surge in sales,” Powell said, adding that average bicycle selling prices grew 40% in the first quarter of 2021 compared to 2019 due to “a mix of more expens[ive] bikes as well as higher retail prices due to increased costs.”
Many local and national bike retailers are facing backlogged orders delayed into the fall and winter seasons.
Employees wearing protective masks work at the Trek Bicycle Shop in San Diego, California, U.S., on Friday, May 15, 2020. (Photographer: Sandy Huffaker/Bloomberg)
Bill Thayer, co-CEO and co-founder of Fillogic, a logistics services platform for retailers, said the supply-and-demand issue hitting the bicycle market right now is not just unique to bikes.
“Every retail store, no matter what they sell, are struggling to meet demand based on supply chain disruptions,” Thayer said. “Manufactured items that include formed components (aluminum, rubber, etc.) like bicycles are far behind because these components are often manufactured in one place and then fabricated/kitted in another.”
BIKE SALES SPIKE DURING CORONAVIRUS AS WORKERS GEAR UP FOR CYCLING COMMUTES
He added that supply chain issues manufacturers and retailers faced during COVID-19 have only snowballed as the country reopens.
“During the peak of 2020, [e-commerce] volume surged in the U.S. but many businesses were still closed,” Thayer explained. “Now that businesses have opened up and demand has spiked through all channels, these supply chain disruptions will last well into 2022.”
The costs of raw materials have increased as a result, leading the final sale prices of bicycles to be higher than they were last year or the year prior.
Mario Veraldo, CEO of MTM Logix, which offers shipping solutions to U.S. and global companies, told Fox News that 87% of bicycles are produced in either China, India, Taiwan, Japan or the European Union.
A woman rides her bicycle on the boardwalk at Coney Island during the coronavirus outbreak in New York, during Memorial Day weekend 2020. (AP Photo/Kathy Willens)
Fitness junkies locked out of gyms, commuters fearful of public transit, and families going stir crazy inside their homes during the coronavirus pandemic have created a boom in bicycle sales unseen in decades.
In the United States, bicycle aisles at mass merchandisers like Walmart and Target have been swept clean, and independent shops are doing a brisk business and are selling out of affordable “family” bikes.
Bicycle sales over the past two months saw their biggest spike in the U.S. since the oil crisis of the 1970s, said Jay Townley, who analyzes cycling industry trends at Human Powered Solutions.
“People quite frankly have panicked, and they’re buying bikes like toilet paper,” Townley said, referring to the rush to buy essentials like toilet paper and hand sanitizer that stores saw at the beginning of the pandemic.
The trend is mirrored around the globe, as cities better known for car-clogged streets, like Manila and Rome, install bike lanes to accommodate surging interest in cycling while public transport remains curtailed. In London, municipal authorities plan to go further by banning cars from some central thoroughfares.
Bike shop owners in the Philippine capital say demand is stronger than at Christmas. Financial incentives are boosting sales in Italy, where the government’s post-lockdown stimulus last month included a 500-euro ($575) “bici bonus” rebate for up to 60% of the cost of a bike.
But that’s if you can get your hands on one. The craze has led to shortages that will take some weeks, maybe months, to resolve, particularly in the U.S., which relies on China for about 90% of its bicycles, Townley said. Production there was largely shut down due to the coronavirus and is just resuming.
The bicycle rush kicked off in mid-March around the time countries were shutting their borders, businesses were closing, and stay-at-home orders were being imposed to slow the spread of the coronavirus that has infected millions of people and killed more than 450,000.
Sales of adult leisure bikes tripled in April while overall U.S. bike sales, including kids’ and electric-assist bicycles, doubled from the year before, according to market research firm NPD Group, which tracks retail bike sales.
It’s a far cry from what was anticipated in the U.S. The $6 billion industry had projected lower sales based on lower volume in 2019 in which punitive tariffs on bicycles produced in China reached 25%.