Supply Chain Matters continues with industry specific supply network updates with published reports that certain global automaker’s bold decisions to maintain semiconductor supply commitments in 2020 have been a competitive differentiator.
Published reports from The Wall Street Journal and from Bloomberg and other outlets reflect that certain global automaker’s bold decisions to maintain semiconductor supply contracts during the 2020 pandemic induced lockdowns have been a competitive differentiator.
With the shortage of semiconductors driving up the retail price and product margins of new and used autos across global markets, semiconductor supply strategy has provided a competitive differentiator in market and financial performance.
We share some noted examples.
Toyota Motor
In early January, Toyota Motor, for the first time overtook General Motors as the U.S. market’s top selling auto producer by annual sales by outselling GM by upwards of 114,000 vehicles in the U.S. market. The Wall Street Journal report of this milestone pointed to the Japan based automaker’s decision to stockpile semiconductor devices which are utilized in an array of vehicle models.
The report Indicated that Toyota executives noted that the automaker was indeed successful in navigating the 2021 supply network constraints including global wide semiconductor shortages across the industry. However, they did not view the U.S. leadership designation as a permanent shift in sales leadership. From our Supply Chain Matters lens, which is a humble yet wise perspective.
In a Supply Chain Matters commentary published in February 2021, we cited a Bloomberg report indicating that Toyota departed from its Just-In-Time inventory management discipline specifically with needs for semiconductor devices. After the 2011 devastating tsunami that impacted norther Japan’s manufacturing sector, including specialized semiconductor suppliers providing semiconductor devices to Toyota, the company’s creation of a of an inventory analysis process that involves upwards of 6,800 parts termed “Rescue” that analyzed all tiers of the supply network. As a result of that ongoing process, Toyota’s CFO indicated in 2020 that the automaker had secured one to four months of inventory buffer as part of this business continuity strategy.
Tesla Motors
Supply Chain Matters recently called attention to electric vehicle designer and producer Tesla’s report of Q4 and full year 2021 vehicle output report. The numbers were impressive, given past history, as well as market demand for the company’s Model 3 mass market sedan. The company reported that in the final quarter, a total of 305,000 vehicles were produced with over 308,000 vehicles delivered to customers.
For all of 2021, the automaker reported 936,000 vehicles were delivered. That compares with the 499,550 vehicles delivery performance in 2019, and an overall 87 percent increase in output performance in the midst of the industry’s global wide shortage of semiconductor devices.
Electrek has since reported this week that almost half of Tesla’s record Q4 end of year production and deliveries came from Gigafactory Shanghai. The China Passenger Car Association (CPCA) released numbers indicating that Tesla sold 70,847 China-made vehicles in December 2021, a new record.
The company’s genesis as a being born in Silicon Valley, as well as its software engineering roots, aided in overall abilities for pivoting electronic design and software changes to either work around component shortages or substitute other electronic components to meet global market demand levels.
BMW AG
Bloomberg reported that BMW AG outsold its luxury car rival Mercedes Benz in 2021 to lead U.S. luxury car sales for a third consecutive year. The report indicates that the milestone was buoyed by efforts to navigate around the industry’s semiconductor shortage with a decision early in the pandemic to maintain many of the luxury automakers semiconductor supply contracts. The report indicated: “While some competitors cut back, BMW’s bullish stance paid off months later.”
The result was that amid the pandemic shutdowns of 2020, both BMW and Mercedes were neck and neck in terms of output. In 2021, BMW’s vehicle deliveries rose by 21 percent to over 336 thousand vehicles while Mercedes sales rose less than one percent in the same period.
Sales of Volkswagen’s rival Audi luxury car unit reportedly rose 5 percent in 2021. That company’s CFO told The Wall Street Journal this week that there remains a structural undersupply of chips that is likely to last throughout 2022, despite his company’s efforts to allocate priority of chips toward most profitable models, and the further development of direct relationships with chip producers far down the supply network.
As our banner attests, this automotive industry evidence once again reinforces that supply chains do matter in overall business performance and market response.
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