Has the Semiconductor Shortage Impacted Demand for Electric Vehicles?

Has the Semiconductor Shortage Impacted Demand for Electric Vehicles?

If it has electric in the name, chips are a guarantee. Most of the items we interact with daily utilize chips in some capacity. How many chips a device may need varies depending on size, function, and other factors. Automotive vehicles—cars—require a large amount to perform numerous, complex functions. Electric vehicles (EVs) require even more.  

With the semiconductor shortage expected to last until 2023, what has the impact been on the EV industry? 

Throughout the global semiconductor shortage, automotive manufacturers have been making headlines. Every month there’s a new disruption to automotive chipmaker supply chains. The fire at an auto-chip plant, Renesas Electronics, in March 2021 resulted instantly in stock drops of Nissan, Toyota, and Honda. Volkswagen would later report profit losses and the automotive industry would lose $210 billion in 2021.  

If the automotive industry has been hit hard during the global semiconductor shortage, has the same happened to electric vehicles? As a result, have electric vehicles been placed on the back burner? 

The answer is no. If anything, the demand for electric vehicles is only going up. What was a $162 billion dollar industry in 2019 will be $200 billion by 2024. The EV market has an expected annual growth of 20%.  

Every automaker from pioneer electric automaker Tesla to established brands such as Volkswagen, Honda, BMW to even General Motors’ Corvette are going electric.  

Even with pandemic downturns, electric car registration increased by 41% in 2020. Three million electric cars were sold globally with an increase in electric bus and truck registrations as well. Consumers want them, but so do numerous government bodies.  

Europe put in place stronger incentives to support electric car sales up to 25% from 2019. Automakers continue to expand portfolios to include EVs in their line and Ford expects 40% of its vehicle volume to be electric by 2030. 

The Biden Administration has, like Europe, prioritized EV production as well. In 2021, President Biden signed the Bipartisan Infrastructure Law to build out EV charging infrastructure with United Autoworks and automakers to increase EV sales shares to 50% by 2030.  

Navigating the semiconductor shortage with the rise in demand has been difficult. Ford and General Motors confirmed lower quarterly sales with strong vehicle pricing offsets due to the semiconductor shortage. Outlook is still good. Mary Barra, GM’s CEO, said GM expects to make 25-30% more vehicles this year despite volatility in chips 

Fledgling EV automaker Rivian’s CEO R.J. Scaringe told Reuters that startups are more at the mercy of supply chain bottlenecks in comparison to established automakers. Chipmakers are promising larger allocations to more entrenched car manufacturers. According to managing director Dan Hearsch from AlixPartners, these automakers have the purchasing ability to buy larger orders or an entire year’s worth of chips in one transaction.  

While semiconductor supplies remain limited, EV manufacturing has improved with production increases expected in the latter half of 2022. While the semiconductor shortage continues, the demand for electric vehicles shows no signs of slowing. Electric vehicles are only gaining in popularity and necessity, no matter the state of the global semiconductor supply. 

It is best to learn how to navigate a shortage now to prepare for potential future shortages than wait for the skies to clear. As it stands right now, the market is too prosperous to ignore.  

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