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Customer LoginsMajor revision for global light vehicle production forecast – what it means for OEMs’ technology deployment
The latest September revision of the global light vehicle production forecast following the semiconductor shortage issue will see this impact filter through IHS Markit's component forecasts. This article highlights the fitments of features and technologies that are expected to be affected and the extent of the impact.
The IHS Markit light vehicle production forecast has been cut by 6.2% or 5.02 million units in 2021, and by 9.3% or 8.45 million units in 2022, to stand at 75.8 million units and 82.6 million units, respectively. For 2023, we have reduced the forecast by 1.05 million units or 1.1% to 92 million units; this is a frontloaded adjustment and from the second quarter output levels are expected to be able to accelerate as supply chains return to normal. If this is the case then strong pent-up demand and the pressure to rebuild stock levels is expected to support elevated levels of production in 2024 and 2025, with 2024 now forecast to hit 97.3 million units, up .2% compared to the previous forecast and 2025 forecast at 98.9 million units, an increase of 2.4%.
If the first half of the year was defined by front-end issues disrupting automotive microcontrollers (MCUs), then the second half of the year and the coming months is increasingly defined by back-end issues affecting all semiconductor end markets and not just automotive. This wider disruption is contributing to the reduced expectations for 2021 and 2022, signaling that even without further external shocks, levels of capacity dedicated to automotive will remain below those required to meet ongoing demand and well below what would be required to allow stock levels to be rebuilt. Ongoing imbalances between supply and demand of semiconductors are to be expected.
The full release on the latest vehicle production forecast revision can be found here. Please follow AutoInsight for the latest information regarding the impact of supply constraints on vehicle production.
The latest September revision will see this impact filter through IHS Markit's component forecasts in Component Forecast Analytics (CFA) and in Feature and Technology Benchmarking (FTB) across AutoTechInsight. These are some of the highlights you can expect to see in the latest revision:
Significant downgrade for the following features and technologies:
- Head-up displays (HUDs)
- 360-degree parking
Medium downgrade:
- Camera sensors
- Traditional displays (center stack, instrument cluster, rear seat entertainment)
- Headunits, in particular those supporting OEM navigation
- Adaptive driving beam (ADB) headlights
- High-end sound systems
Marginal downgrade:
- Telematics
- Vehicle-to-everything (V2X) communication
Other implications we have observed:
- Trim variety wanes on dealer lots: New car
buyers are increasingly discovering that in many cases, the
vehicles available at their dealerships are offering limited trim
variants due to delays in sourcing optional technology content.
Examples include but are not limited to the likes of Mercedes,
Acura, Ford, Nissan, Honda, Infiniti, Volvo, Stellantis, and
others. Reasons for an individual case of limited trim offerings
vary, but in many cases the squeeze comes from advanced driver
assistance systems (ADAS) or in-vehicle infotainment features. For
example, the delivery date of some Volvo vehicles in Europe is
adjusted based on whether the vehicle comes with an option
360-degree parking camera. Some OEMs that have a technology
contenting strategy heavily driven by trim level like Ford and
Honda have created new low-end trims on some high-volume vehicles
that allow them to minimize delivery delays by removing some
features heavily exposed to the semiconductor shortage. These trims
have basic contenting relative to the price point, for example they
might not feature climate control, voice activation, Bluetooth,
high beam assist, and virtually no ADAS feature. Another strategy
OEMs have pursued is to remove some specific features on basic
trims, such as switching from digital instrument cluster to analog
gauges or as Mercedes has done on its EQA via downgrading headlamps
from multibeam LED to base LED headlamps. Other examples include
some OEMs providing one key fob rather than two with the promise to
deliver the second at a later point or even not fitting a part
altogether and offering a rebate, as seen with in-vehicle charging
mats. The impact to IHS Markit data is a short-term bias against
higher spec, optional technology and features in our forecasts as
previously outlined.
- Connected car tech developments hit a pause:
Global automakers such as General Motors (GM), Nissan, and Renault
have already paused some of their vehicle production plans and
technology innovations. The Chevrolet Silverado is one of the
models that will lack a planned HD Radio feature due to chip
shortage. Japanese carmaker Nissan was shipping thousands of
vehicles without navigation systems that were meant to come as
standard, simply because it does not have the components and cannot
afford to keep them sitting in a parking lot. Additionally, Renault
has removed an oversized digital screen from the steering wheel of
its Arkana SUV models to save on chips. The chip shortage has also
impacted telematics technologies, as fleet customers find it
challenging to acquire necessary telematics hardware. While this
has been felt more strongly on the aftermarket side, if the
semiconductor supply constraints are not resolved soon, it can also
affect upcoming 5G-based telematics systems for OEM-installed
applications.
- Are electric vehicles (EVs) less affected? IHS
Markit has gathered anecdotal evidence that EVs still seem to be
associated with delivery times that are in line or even shorter
than their internal combustion engine (ICE) equivalent or vehicles
positioned in a similar segment. For example, Mercedes EQC, a
recently launched EV, has a two-month delivery time, while a GLC,
which features a traditional powertrain, has five months. Although
this is not a pattern observed with all OEMs and certain
factors—available inventory during chip shortage disruption or
when OEMs prioritize certain vehicle categories—could affect
this, it is nonetheless counterintuitive that EVs are not among the
most affected vehicle segments, given the substantially higher
semiconductor content that these vehicles have, some with even
three times as much in the powertrain domain alone. Some public
statements from the likes of Stellantis on their strategy to
actively prioritize EV production rather than their
ICE-counterparts certainly adds weight to the anecdotal evidence we
have gathered, signaling that EV production might become more in
vogue across the board.
- OEMs start to reinvent their chip supply to prioritize
supply assurance over cost: Until 2020, the firm order
window for automotive chips was 12 weeks, which is shorter than the
typical 14-16 weeks required to fabricate a chip. Since the second
quarter of 2021, the firm order window has now been extended to at
least 12 months to provide more visibility to semiconductor
suppliers. OEMs have revisited their inventory-related policies to
provide a buffer in the event of short- and medium-term
disruptions. OEMs are even reportedly exploring booking capacity at
tier-2 foundries such as TSMC or GlobalFoundries over a year in
advance, a move that is in stark contrast with previous practices.
Finally, IHS Markit expects OEMs to learn from the danger of
concentrating chip wafer fabrication (front-end) and chip packaging
and testing (back-end) regionally and with limited suppliers. This
approach has been cost effective over the past decade, but it is
susceptible to local disruption being felt globally, such as the
COVID-19 lockdown in Malaysia that has been impacting the chip
assembly with major disruption to vehicle production.
- Software content revisited in light of semiconductor
shortages to mitigate short-term launch issues: In modern
vehicles, software content is intrinsically linked to hardware and
vehicle trim definition. Many OEMs are now revisiting vehicle
feature content and adopting two key strategies to mitigate the
short-term vehicle launch issues. Firstly, by removing the
supplementary nice-to-have features that will not influence the
product launch and keeping must-have features to deliver the
vehicle to a customer per committed time frame, i.e., a truck can
be manufactured without cylinder deactivation control. Secondly, by
allowing for a recall arrangement within the sales contract to
upgrade the vehicle to the original request, i.e., retrofit the
cylinder deactivation control at a later date when chipsets are
available. By adopting such a strategy, one North American OEM
managed to resolve 9% of its truck sales during the second quarter
of 2021.
- Widely deployed camera sensors suffer most among
autonomy sensors: The wide and often dense fitment of
camera sensors today has suffered the biggest impact from a reduced
short-term vehicle volume outlook. Despite strong annual net unit
growth of approximately 30 million cameras in 2021 and 2022, the
decline in vehicle volumes was stronger than growth in new fitment
and increased technology penetration—even before the largest
decrease in light vehicle volumes in the latest September outlook.
Based on August light vehicle volumes, analysts removed 4.8 million
units of camera sensor volume in 2021 and 1.3 million units in 2022
(relative to the Autonomy second quarter 2021 outlook). The
strongest shock yet to light vehicle volumes will have a material
impact in the fourth quarter Autonomy Forecast update, but analysts
maintain a very positive outlook for camera sensors over the long
term. Radar and lidar sensors both take a hit to their growth rate
with this vehicle forecast downgrade, but both remain in positive
growth territory.
- The rise of dealer installation: Dealer installed technology components such as headunits, audio systems, and display systems have traditionally been a uniquely Japanese approach to the market, with as many as 15% of new vehicles sold in Japan offering these selections for customers at point-of-purchase. Ongoing supply chain constraints are starting to signal that this may become more commonplace, most notably with the Volkswagen Lavida in Mainland China moving this direction to avoid any possible delays to its 300,000-400,000 annual unit sales. In IHS Markit data, this trend will be reflected by more "None" and "Not Applicable" field entries as post-production installation is not considered.
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The above article is from AutoTechInsight by IHS Markit. AutoTechInsight provides a wealth of original thought leadership, data, and analysis on a broad spectrum of automotive industry topics and sectors. Visit AutoTechInsight to view all our offerings.