Semiconductor Shortage Forces Companies to Cut Cars

  • The shortage of semiconductors has also influenced other automotive industries.
  • It will trigger wide ranging implications all over the industry, from car companies acquiring component parts from both distributors.
  • Tesla is making remarkable progress in the Chinese car market.

According to news sources, Nissan has reduced the production of vehicles due to a shortage of semiconductor materials. The Japanese company will decrease development of Note compact cars by 5,000 units in January 2021. Output is anticipated to be decreased starting in February.

The Nissan Motor Company, Ltd., trading as the Nissan Motor Corporation and often shortened to Nissan, is a Japanese multinational automobile manufacturer headquartered in Nishi-ku, Yokohama, Japan.

The shortage of semiconductors has also influenced other automotive industries. General Motors had already agreed to cut demand by one-tenth in January. The condition is hard for Nissan, since they cannot provide enough semi-conductors for their vehicles.

Nissan had plans to manufacture about 15,000 compact vehicles in January but has decreased the number by 5,000 following the shortage of components. The Nissan Note is the company’s most famous brand, which has been selling well since its release in December 2020.

Ola Kallenius, Daimler chief executive, said “the whole chip production industry was thrown into a little bit of a flux” in 2020. That was “affecting many or most [manufacturers’] in some shape or form.”

“I’m very happy that we have a flexible production system because we are going to need that,” he added. “We are doing what we can to mitigate the situation.”

Nissan plans to manufacture 3.8 million vehicles globally in fiscal year 2021, 560,000 units of which are manufactured domestically. Cuts in January account for 1% of the annual output schedule, but the complexity of semiconductors is predicted to continue a big concern.

Nissan is projected to decrease plant revenue in February and maybe beyond. Global supply for semiconductor materials would decrease because of massive demand for smartphones and fifth-generation wireless stations.

In addition to Japan’s vehicle manufacturers, Volkswagen has reported intentions to slash development of passenger cars in North America, Europe, and China. Due to shortage of semiconductor raw materials, the German auto parts companies, Continental and Bosch, has responded to the customers by acknowledging the delays in shipments.

It will trigger wide ranging implications all over the industry, from car companies acquiring component parts from both distributors.

Tesla, Inc. is an American electric vehicle and clean energy company based in Palo Alto, California. The company specializes in electric vehicle manufacturing, battery energy storage from home to grid scale and, through its acquisition of SolarCity, solar panel and solar roof tile manufacturing.

“After the industry shutdown in the early phase of the crisis and the resulting abrupt drop in demand, automobile manufacturers across all regions increased their production volumes much faster than expected by market experts,” Continental said.

“With lead times of six to nine months, the semiconductor industry has not been able to scale up fast enough to meet this unexpected growth in automotive demand,” it added.

Tesla in the China Market

Tesla is making remarkable progress in the Chinese car market due to its low-cost technology and cheap purchases. Similarly, Tesla Motors have frequently reduced the price of the Model 3 automobile, as well as the new Model Y mid-sized SUV.

Earlier this year, Tesla’s shares went up in value by a significant amount, which has made its CEO, Elon Musk, the world’s richest man. Mr. Musk, stated that the dwindling demand from China’s transport sector has had little impact on their sales.

Some company commentators predict that Tesla is becoming more appealing to Chinese customers because of the regions it serves. They also say that there is room for a large number of competitors in the Chinese market.

China will have 20% of all car sales made by EV alone by 2025. Tesla is a good brand in autonomous cars, thus, Chinese carmakers should not be complacent.

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George Mtimba

George clarifies how the news is changing the world, how world news trends affect you. Also, George is a professional journalist, a freelance news reporter and writer who is passionate with current world news.

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