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Thursday 14th April 2022

Car factory

March and September are big months for the automotive industry, with new car plates bringing about a surge in demand. Until recently, this has meant lots of sales and happy drivers, but a series of world events has created a significant shortage of new vehicles in the market. So, why has this happened and how does it affect you?

Why is there a shortage of vehicles?

The current shortage of new vehicles is globally complex and a multitude of issues compounding the current landscape.  At a high level the core reasons include:

  • Demand, post covid has outweighed supply
  • Ongoing challenges with workforce availability
  • Shipping delays compounded by the early stages of Brexit Russia’s attack on Ukraine
  • A severe  shortage of semiconductors

What are semiconductors?

An average car contains up to 3,000 tiny semiconductor chips containing billions of transistors. With minute electric circuits, these chips are responsible for processing all the tasks and information that modern cars rely on to make them work.

But it’s not just cars. Tablets, computers, washing machines, phones, and every conceivable electronic device used today will have these microchips running the show. This means demand is incredibly high and vehicle manufacturers, who cut back their orders of chips during Covid, have been caught short by the big tech companies swallowing up production of these vital chips.

Why aren’t there enough semiconductors?

Semiconductors are extremely difficult to manufacturer. In fact, they are so intricate that former Intel chairman, Craig Barrett, called them ‘the most complicated devices ever made’. As a result, there are relatively few companies, operating in a handful countries, which are capable of manufacturing them in large quantities.

And to make matters worse, the automotive supply chain has traditionally operated on a ‘just in time’ model, which means that there is very little room for anything to go wrong.

At the height of the pandemic, the worldwide surge in demand for personal computers, tablets, smartphone, and webcams, meant that supplies of semiconductors were switched away from the automotive industry and into consumer electronics.

Covid related closures at semiconductor factories and distribution channels then added to the list of problems to contend with. More recently, the Russia-Ukraine conflict has begun to put even more pressure on the automotive supply chain, affecting not just semiconductor production but additional components such as wiring harnesses which, as far as Volkswagen is concerned, is now the biggest issue they face.

What is the latest situation?

All manufacturers are affected in some way and some, such as Audi, have simply informed customers that it is a very fluid situation and that they will be kept informed as things develop. Whereas BMW are quoting 20 – 24 weeks for some models and Ford are working on anywhere between three and seven months, depending on the model chosen. On the other hand, many Vauxhalls are only taking between two and three months.

These are just a few examples, and every manufacturer is affected differently. It’s a situation that is constantly changing and we have even seen waiting times of up to a year for certain models.

What can drivers and fleet operators do?

For many drivers and fleet operators, it will need to be a case of planning a little further ahead and starting the process of choosing a new car much earlier than normal. We are recommending drivers and fleet managers increase the renewal cycle of their assets from 6 months in advance to 9 months in advance. There is also the option to place current vehicles into formal extensions, rather than informal agreements, to ensure your vehicles are performing to contract.

An additional option, proving popular for Fleet Operators, is retaining suitable vehicles which may have been terminated early, with the view of placing them into a central pool to re-assign to any new employees or use as rental vehicles, rather than giving them back and paying early termination fees.

For those needing a vehicle quickly, you may need to look at alternative manufacturers and specifications. There is likely to be limited stock options for the next 12-18 months. However, the most important thing drivers and fleet operators can do is to understand that the situation is complex, and isn’t an easy fix, but our Account Managers are here to support you.

Planning for the future

There has never been a more ideal time to be thinking about your vehicle electrification  policy. According to Zap-Map, in the last 30 days there have been nearly 900 new public charging devices installed across the country, which equates to over 1200 new connectors. This means if the lead time on a new EV reaches 12 months, then the UK would have installed an additional 14,000+ public connectors, by the time the new EVs are delivered.

The argument for charging infrastructure inaccessibility is becoming smaller, so fleet operators reviewing their car policies that don’t promote electric cars are only putting themselves at a commercial disadvantage as the deadline for carbon neutral fleets edges closer.

How can Novuna Vehicle Solutions help?

We work in partnership with our customers to select the right vehicle for their needs, delivered within the best possible timeframe. Our Account Managers are continually reviewing lead times, and discussing what vehicles are going to be most accessible with the shortest lead time possible.

To find out more, just get in touch and let us know what you are looking for and we’ll take it from there.

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Novuna Vehicle Solutions is a trading style of Mitsubishi HC Capital UK Plc. Other brand names under which we trade include Novuna Consumer Finance, Novuna Personal Finance, Novuna Business Finance and Novuna Business Cash Flow.

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