Having experienced a delay on an order for an electric vehicle himself, Charlie Atkinson investigates the ongoing issue of semiconductor shortages.
It is seemingly impossible to get your hands on a Volkswagen ID.3, at least this year, anyway.
Back in April 2021, EV Powered ordered a Volkswagen ID.3 through fleet management company, LeasePlan. Usually, the turnaround for delivery time is about eight weeks, but with the effects of the pandemic still there to be seen, there was an expectation that it may be a little longer than that.
Fast forward to January 2022, and after a few previous delivery date changes, we receive this email from a representative at LeasePlan: “Unfortunately, I have bad news as we have been advised of a further delay to the ID.3 we have on order for you. Volkswagen have advised the lead time on this model is 2023 due to the volume of orders at the factory.”
Volkswagen’s struggles throughout the COVID-19 pandemic have been well-documented, with factory closures and company big-wigs speaking at length about the challenges it has faced.
In November last year, Volkswagen suspended production at its Zwickau plant, one of its largest production sites, for a week due to a lack of semiconductors, resulting in a backlog of around 5,000 vehicles.
The Zwickau plant is responsible for the manufacturing of the Volkswagen models ID.3, ID.4 and ID.5, as well as the Audi Q4 e-tron, so that goes some way in explaining the delays that have been attributed to the “volume of orders.”
With production now back underway, Volkswagen is making an effort to catch up, especially considering the growth in demand for electric vehicles. Just a few days ago, the manufacturer confirmed the aforementioned Zwickau plant would be the first large-scale facility of any volume manufacturer worldwide to switch over all production from internal combustion engine vehicles to electric vehicles.
But if VW is seemingly going full-throttle in the production of its electric models, then why must we, and everyone else in the same position, have to wait until 2023 for one of the most popular and in-demand electric vehicles?
The semiconductor shortages are the main reason. It is easy to underestimate the impact of these shortages on the industry, but it is well and truly a crisis, and one that is not just affecting Volkswagen.
Like VW, many manufacturers had to halt production last year, including Ford, Toyota and Volvo, whilst Audi took to temporarily deleting features from its cars to help hurry production along. Even more recently, it was revealed that Jaguar Land Rover would receive £500 million of state-guaranteed loans to kickstart production following the impact of the global chip crisis.
It is a crisis that isn’t just impacting cars, but other products such as phones and washing machines. Put simply, there hasn’t been enough of them to go around, and there still isn’t.
Earlier this week, Hyundai’s executive vice president, Seo Gang Hyun, said on a company conference call that he expects the shortages to carry on into Q2 this year, whilst Daimler CEO Ola Kallenius expects the issues to stretch on into 2023.
Focusing on Volkswagen specifically, the group’s purchasing chief Murat Aksel said: “We hope for a gradual recovery by the end of the year” but said semiconductor supply will remain “very volatile” in the third quarter. He believes the automotive industry will require 10% more production capacity for chips.
However, not all manufacturers have been impacted.
Tesla, for example, managed to weather the semiconductor storm right throughout the pandemic, to the point where the Tesla Model 3 became the best-selling car in the UK in July last year.
In addition, new data from Finbold predicts a record number of deliveries from Tesla this year, with the manufacturer expected to ship over 1.5 million models.
But why is Tesla’s supply chain thriving in a period that has floored all other manufacturers?
Well, Tesla had taken a similar step to Audi by removing certain features, such as USB ports and Bluetooth chips. It had also removed radar sensors and lumbar support for front passenger seats.
However, Philip Nothard, insight & strategy director of automotive services company Cox Automotive, provides a deeper insight into the reliability of Musk’s supply chain.
He said: “Tesla has successfully weathered the storms of reliability concerns, the impact of Covid-19, and the semiconductor and raw materials shortages crisis, far better than other manufacturers, including those still mainly involved in internal combustion engine (ICE) vehicle production. This is down to the fact that Tesla’s CEO, Elon Musk is heavily involved with consumerism rather than solely automotive manufacturing. This would have enabled him to see what was on the horizon and means he hasn’t needed to rely on Tier 1 and Tier 2 suppliers for semiconductors, unlike manufacturers of ICE vehicles. He has built his own automotive supply chain ahead of time, while several traditional OEMs are now clamoring to keep up in the EV race.
“According to Statistica, data shows that Tesla has grown its brand even further this year, producing 499,000 vehicles in 2020, before going onto building 627,000 in the three-quarters of 2021. Tesla is not unique in the requirement of battery supplies. While all car manufacturers are investing heavily in the requirement of battery supplies, Musk is prepared to invest in battery manufacturing gigafactories, which will continue to grow the presence of Tesla globally.
“This recent news echoes sentiment from Cox Automotive’s 2021 Insight Report, which highlights the likelihood that every stage of the vehicle lifecycle ecosystem will experience some short-term pain. However, the outlook for global automotive is one of a leaner, stronger and more efficient technology-led business models. The influx of EV models into the global vehicle parc will begin this transformation.”
There is light at the end of the tunnel it seems. Whilst manufacturers have struggled to adjust to the chaos of semiconductor shortages, the effects of the pandemic have provided valuable lessons for all.
Although there may still be lengthy delays for electric models such as the ID.3, we are heading towards a fully-electric future, and once the effects of the pandemic have truly subsided, manufacturers all around the world will be able to put their foot down on production and begin to meet the unmistakable demand for EVs.