Fleets face new vehicle supply shortages until end of 2022

Fleets face another difficult 12 months in sourcing new vehicles in 2022, due to the global shortage of semiconductors.

By Jonathan Manning, Editor, Fleet Europe (pictured)

These microchips are used in all areas of vehicles, from fuel-pressure sensors to digital speedometers, navigation displays, infotainment systems, lights and all the new connected safety technology.

The lack of chip supply has closed OEM production lines and seen new vehicle order times extend from six to nine months and even a year. Some manufacturers have removed certain models from their inventories or told their dealer networks not to take orders, until semiconductor production reaches normal volumes.

OEMs worried

KPMG’s Annual Global Automotive Executive Survey of 1,118 industry executives found that over half (52%) were either ‘very’ or ‘extremely’ concerned about the price and availability of semiconductors, while the management consultancy Roland Berger sees no sign of relief to microchip supply issues until 2023.

The shortage has caused serious issues for fleet replacement cycles, forcing companies to keep vehicles for longer than anticipated and to extend leasing contracts. In some countries it has also meant company car drivers having to stay in their highly-taxed petrol and diesel models because no low or zero emission alternative is available.

Leasing solutions

Alain van Groenendael, Arval Chairman and CEO, said the leasing company’s: “N°1 mission in 2022 will be to help and support our clients overcoming the delays in new vehicles deliveries and in their energy transition.”

LeasePlan forecasts that OEMs will not return to normal lead times until the final quarter of 2022. In the meantime, it advises its fleet customers to adopt a proactive approach:

• Place orders as early as possible: six to nine months earlier.
• Accelerate the electrification of the fleet as OEMs are prioritising the production of low and zero emission vehicles.
• Assess what equipment is needed when ordering a vehicle.
• Explore widening the scope of OEMs on the company car policy.

Widening choice lists might enable drivers to find a vehicle in stock from a manufacturer that is not normally on a fleet’s choice list. Fleet decision makers also need to decide whether to accept new vehicles with elements of specification missing, because the OEM has not been able to source the semiconductors required. Features such as automatic boot opening and contactless phone charging have both been dropped as car makers have concentrated on keeping production lines open.

Residual value rise

The silver lining to this crisis has been the sustained rise in residual values. With fleets unable to defleet vehicles until they can source replacements, there has been a shortage of secondhand cars and vans reaching the used markets. This has driven up prices in many countries across Europe.

Andreas Geilenbruegge, head of valuations and insights at Schwacke, part of Autovista Group, said: “More vehicles continue to leave the German used car market than are replenished by returns. Consequently, the available supply keeps falling and there were 35% fewer used cars available in November than in January 2020.”

In the UK, Glass’s reported that the average trade value of a used car was 35.3% up in November on the same month of 2020, although it does not expect the trend to continue, forecasting that used prices have now reached their peak.

New car sales shortfall

The microchip shortage has led to production and new car sales shortfalls in Europe. For the first nine months of 2021, EU car production was 3 million vehicles lower than 2019, pre-pandemic levels, while total new car sales for the first 11 months of 2021 were below last year’s level, which itself was a record low for the European Union.

This has led the European auto industry to demand more self-sufficiency in semiconductor production, manufacturing the chips in Europe.

Oliver Zipse, Chairman of the Board of Management of BMW and President of the European manufacturers’ association ACEA, said: “For the sake of our industry’s global competitiveness, Europe must strengthen its technological sovereignty to be able to provide essential components to the region’s core industries.”

The campaign has political support - Ursula von der Leyen, European Commission President, said in her State of the Union address that the EU still largely depends on “chips manufactured in Asia. So, this is not just a matter of our competitiveness, this is also a matter of tech sovereignty.”

However, it will take months if not years to build the manufacturing facilities to produce semiconductors in Europe, leaving fleets at the mercy of supply chains beyond their control. Extending contracts and ordering early look set to be on fleet agendas in 2022.

Image: Shutterstock